Important editorial in today's WSJ with implications about where to live, and own immovable assets:
"Barack Obama is asking Americans to gamble that the U.S. economy can be taxed into prosperity. That's the message of his campaign for the Buffett Rule, which raises income-tax rates on millionaires to a minimum of 30%, and for the expiration of the Bush tax cuts. He wants to raise the highest income tax rate by 20%, double the rate on capital gains, add a new 3.8% tax on all capital earnings, and nearly triple the dividend tax rate."Also points out that California and Illinois are planning to increase the top marginal rates even more, to 13% and 11% respectively! Meanwhile, "Georgia, Kansas, Missouri and Oklahoma are now racing to become America's 10th state without an income tax."
There's nothing stopping Illinois from entering the same positive-feedback death spiral that killed Detroit, if it makes bad enough decisions. If it does, so much better for the states that are lowering taxes and encouraging productive enterprise. Imagine having other states, besides Alaska, that pay dividends to residents?
Tonight's thought: consider a division of the country into zero income tax states with stingy welfare regimes that productive people flee to, and ultra high income tax (double-digit %) states with crippling regulation that productive people flee from, in the context of Bill Bishop's Big Sort.
Which states' muni bonds do you want to own? Which states do you want to own property in? What if a group of these productive states issued a currency?
New York is a wildcard. New York will do fine so long as it can skim a vig off of the world's investments. However, if the no-tax states were to set up, say, a 100 sq-mile, zero-tax, zero-regulation, caveat emptor enclave for startups, that would be it for foreign ibanks.
Sell your Manhattan apartment at the earliest of serious startups being funded on Kickstarter without VCs, or a major Texas or OKC-based energy company creating an internal ibank that lends and finances new energy companies directly without passing through Wall Street. Imagine if they spent the vig on scientific and feasibility research instead of marketing.