Why Jobs Leave Los Angeles (and other high-tax, arbitrary jurisdictions)


Rick Newcombe, the force behind Creators Syndicate, takes the Wall Street Journal to explain how the city of Los Angeles tried to screw his business into a higher tax rate back in the 1990s. Creators fought back and won a lower, more-appropriate rate for the business.

But that was then, and this is now:

You can imagine how relieved we were on July 1, 1994, when the ruling was issued. We won, and firmly planted our roots in the City of Angels and proceeded to build our business.

Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling.

Their official position is that the city is not bound by past rulings—only taxpayers are. This is why we have been forced to file a lawsuit. We will let the courts decide whether it is legal for adverse rulings to apply only to taxpayers and not to the city.

Whole thing here. It's a great testament to how tax jurisdictions work to screw people and businessess in all sorts of ways. And it's a reminder that prosperity cannot be taken for granted. If an authority starts arbitrarily changes the rules, people and jobs and businesses will leave. More cities, states, and countries need to learn this basic lesson. (And fast!)

Creators syndicates Reason's own Jacob Sullum and we're happy to run other Creators writers such as David Harsanyi and John Stossel.

Newcombe has written for Reason as well, back in 1994, in praise of pipe smoking.

Update: Click below to watch the latest episode of Glenn Reynolds' InstaVision, which features an excellent interview with SoCal urban whiz Joel Kotkin (read his Reason stuff here), who explains why California's economy is tanking, namechecks Matt Welch, and talks about how enviro regs are depopulating the Central Valley.