15 March 2012

Island haven?

The right wing argues that raising taxes back to historically-normal levels will have disastrous results; rich people will flee the country, jobs will not be created, etc. We're all aware of the historical counter-examples: taxes on the rich were much higher under Reagan than today, and in the 1950s and 1960s they were far higher even than that, but unemployment was low, the economy was growing well, and rich people were not fleeing the country -- while job creation has been mediocre ever since the huge Bush tax cuts.

But there's also a modern test case which is often overlooked: Puerto Rico. The island is a US territory and has most of the benefits that come with being part of the US, but it's entirely exempt from federal income taxes. If taxes are really such a problem, Puerto Rico should be an economic boom zone, and rich Americans should be flocking to reside there to escape federal income taxes.

Is that the case? Well, no. Almost half the population lives below the US poverty line. And there seems to be no flow of wealthy people leaving the mainland US to take up residence there.

Right-wing claims about the disastrous results of restoring normal tax levels are just another case of a hypothesis that sounds superficially logical but isn't supported by what happens in the real world.

11 Comments:

Blogger Tommykey said...

Almost half the population lives below the US poverty line. And there seems to be no flow of wealthy people leaving the mainland US to take up residence there.

From what I read recently in an article in USA Today, there's a migration of educated and skilled workers out of Puerto Rico, because of the lack of jobs and the crime rate.

15 March, 2012 16:05  
Blogger Infidel753 said...

Hardly surprising. The small-government low-tax mania tends to correlate with poor infrastructure and high crime, in the real world.

16 March, 2012 05:14  
Blogger Green Eagle said...

Rich people will flee the country? Hallelujah, the jubilee is here!

16 March, 2012 10:48  
Blogger John Myste said...

I saw something the other day that listed minimum wages in each state. I believe most states must provide a minimum of 7.25. Peurto Rico's minimum wage was 4.10, I believe.

You would think that economy would be booming beyond belief. It should be a great place to start businesses, which would earn record profits and those profits would trickle down to those making 4.10 per hour.

If that has not happened, rest assured it will. Supply Side economics sometimes takes decades, even centuries, perhaps millennia, to work, but inevitable it is the road to universal prosperity.

16 March, 2012 16:20  
Blogger John Myste said...

Oh, and I am certain that no businesses in Peurto Rico offshore. Mostly everything is produced locally, I suspect.

16 March, 2012 16:21  
Blogger Infidel753 said...

GE: That would certainly make politics less corrupt. Especially if the Koch brothers left.

JM: Surely it won't take too much longer -- the rock-bottom-wage-fuelled boom will kick in around the time that Satan (#1 investor) starts commuting to work on a snowmobile.

16 March, 2012 16:49  
Blogger Robert the Skeptic said...

I think the take-away concept here is that the Republicans would dearly love to export the Puerto Rico model to the other 50 states.

16 March, 2012 21:07  
Blogger Tommykey said...

Of course, we know what some of the wingnuts will say in response to this.

"The reason why the model doesn't work in Puerto Rico is because the island is full of Puerto Ricans."

Remember, in wingnut world, the model can never fail, it can only be failed.

17 March, 2012 06:04  
Blogger Infidel753 said...

RtS: If they had their way we'd become a Third World country.

TK: Only a few of them would say that -- but many of them would be thinking it.

17 March, 2012 07:44  
Anonymous Mavricii pochivka said...

It's strange that almost half of the population lives below the US poverty line. I think it's a good place for new investments.

17 May, 2012 02:30  
Blogger Infidel753 said...

MP: I don't think you're quite getting the point.

17 May, 2012 03:17  

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