THE CHAIRMAN'S CORNER

I read a fascinating column in the Wall Street Journal http://online.wsj.com/article/SB121124460502305693.html?mod=opinion_main_commentaries the other day that I wanted to share with all of you. The article is about a study done by Kurt Hauser, a San Francisco investment economist, and it takes the classical supply-side economic model of taxation and looks at it in a new light. In short, the study shows that regardless of the rate of taxation levied by government, people will only pay a certain percentage of their output in taxes. Over time, Americans, regardless of the rate at which they are taxed, will only pay, on average, 19.5% of the GDP to the government. This means that when people are taxed at too high a rate they will generally produce less and this will lead to a decrease in the tax base. This study has broad implications at the state and local levels because of the increasing mobility of tax paying families. In other words, because it is so easy to move across state, and particularly town, lines there is no incentive to stay in a high tax jurisdiction when you can enjoy the same level of income and keep more of it by moving. So, the next time policy makers think of increasing taxes by 7%, they might want to think about how many people will actually pay that rate. You can’t tax something that isn’t there, and if we keep up our current pace in West Hartford we may end up with no one left to pay the bills.

Let us know what you think.

Justin