But there is also a flaw in the Laffer-Moore analysis. It is the overt political bias in the states they single out. Other states of all political colors from Idaho to Iowa to Montana to Wisconsin to South Carolina to Maine sport top marginal state income tax rates of 7 percent or more.
Idaho, with a 7.4 percent tax rate on joint incomes above $22.086 (that's right), is the nation's fastest growing state.Physically, it's beautiful. Politically, it fails to fit the Laffer-Moore script.
Idaho's high rate on a relatively small income may be an outlier. But in many of these states, high earners hit the top tax rate at much lower income thresholds than their counterparts in the blue states Laffer and Moore cite. Just talk to a financial advisor with physician clients in South Carolina or Maine and they'll tell you these doctors are hardly thrilled with the new tax law that some see as penalizing the upper middle-class.
It often isn't practical for a 57-year-old professional or business owner with an established clientele to pick up and move, especiallly if they are eyeing retirement in 10 years or less. And if you are a farmer in Iowa paying the state 8.98 percent on the last dollar of earnings above the top threshold of $70,785, relocating isn't even an option.
At least Iowa is considering a reduction in state income taxes. It's a different story in New Jersey where newly elected Gov. Phil Murphy, a former Goldman Sachs partner with a nine-figure net worth, is struggling to bring back a millionaire's tax. Many of Murphy's fellow Democrats oppose the concept, arguing it will only accelerate tax flight.
If nothing else, the state tax laboratories are expanding.