Last week, it was announced that the Argentine peso has collapsed, that Beretta is expanding (not in Maryland, but is moving much of its operation to Tennessee), and that foreign investment in France has fallen some 77 percent since that nation’s socialist government declared war on the country’s rich and successful.
These seemingly unrelated developments actually combine to illustrate in stark terms the fatal weakness of socialism and its progressivist American cousin.
Those who believe in creating a utopian brave new world either fail to realize that people are people or decide they have to create a new citizen willing to spurn self-interest in cheerfully doing whatever the state deems in the public interest.
Failure to take human nature into account leads to economic and social failure; a government decision to use whatever means necessary to change human nature leads both to failure and to something far worse.
Argentina’s president, Cristina Fernandez de Kirchner, simply denies the existence of fundamental laws of economics and seeks others to blame as the peso and her nation’s economy collapse around her.
France’s new socialist regime seemed actually to believe that confiscatory taxes would punish the rich, bring wealth to the state’s coffers and have no real impact on the behavior either of French citizens or foreign investors. Any half-educated historian could have told them that action begets a reaction.
The men and women who French President Francois Hollande and his minions would turn into serfs aren’t bound to the land as were the men and women abused by French tyrants of an earlier era. They can move and are moving elsewhere, and those who provide the capital needed for investment and economic growth can move and are moving their money elsewhere, too.
Today’s technology has freed the working entrepreneurial classes to move their businesses and direct their investments to nations that won’t confiscate their earnings, demonize their activity or hamstring their ability to establish and run businesses that contribute to a nation’s wealth.
France is discovering that as this is being written, as are the governors of Maryland and many other states in this country.
What is truly amazing is that so many nations and states seem blind to the consequences of their own policies and just don’t understand it when taxpayers and business flee to friendlier climes. Some years ago, Beretta came to the United States to build its first manufacturing plant here and chose Maryland as its U.S. home.
The company found good workers in Southern Maryland and became the largest private employer in the area where its new plant was located. The future there seemed bright until the one-party government of Gov. Martin O’Malley went after firearms, attacked those who manufacture them, raised a bunch of taxes and made it difficult for the company to either profitably market or manufacture them in the state.
Beretta executives decided at some point that they didn’t have to take the sort of treatment they were receiving at the hands of Mr. O’Malley and began looking for a new U.S. home.
They found one in Tennessee, which combines a firearms-friendly citizenry and government with some of the lowest taxes of any state to which they could move.
Marylanders, like the rulers of France, seem shocked that anyone would abandon them so cavalierly.
A part of the genius of the federal system designed by this nation’s Founders is that the states can experiment with policies of all sorts.
As Supreme Court Justice Louis Brandeis observed in New State Ice Co. v. Liebmann, a “state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
The states’ freedom to serve as independent sovereign entities has diminished in recent years, but in the matter of how and to what degree they tax and regulate those who live and do business within their borders, they retain enough freedom to compete for taxpayers, entrepreneurs and investment.
That’s why people in California, Maryland and New York, for example, see Texas Gov. Rick Perry in television ads urging them to pack up and move to Texas for a better life, greater freedom and lower taxes. It’s why so many are doing just that.
Travis Brown studied Internal Revenue Service data from 1995 to 2010 (the last year for which such data was available) to determine just what impact higher state tax rates and, especially, state income-tax rates have on people deciding where to move or locate their businesses.
Mr. Brown, in his book “How Money Walks,” readily acknowledges that people move for other reasons as well, but notes that in the years he studied, people earning some $2 trillion in combined adjusted gross income moved from the 10 highest-taxed states such as California, New York, New Jersey and Maryland to the 10 states that impose the lowest tax burden on their citizens — states such as Florida, Tennessee and, yes, Texas.
The evidence is pretty clear, but governors like Illinois’ Pat Quinn or Maryland’s Mr. O’Malley are no more perceptive than the current rulers of Argentina or France.
New York’s very liberal governor, Andrew Cuomo, does seem to see some connection between his state’s taxes, regulation and the fact that taxpayers are leaving in droves. The same cannot be said for New York City’s new leftist mayor, Bill de Blasio, who, if he has his way, will drive those capable of paying to run his city to flee somewhere — anywhere — else.
David A. Keene is opinion editor of The Washington Times and former president of the National Rifle Association, where he continues to serve on the board.