Economics

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

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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.

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  1. Newcombe is a great example of a dude with first-hand experience in getting the shaft from the government.

    I think it would be great if small and medium sized business owners would bring their stories relating to confiscatory tax rates to the public. Big business has proven itself all too willing to work with government to drive out their smaller more nimble competitors. It’s the more modest firms that can really speak to this issue in a credible way.

  2. I suppose this guy thinks he can spend his money better than the City of Los Angeles.
    What a wackjob.

  3. He is working off the misguided assumption he will be ALLOWED to take his business out of the state. MWUUUUHAHHAHAHAAHAHAHAAAA!!!!!

  4. What the hell is wrong with Newcombe? Doesn’t he know he’s supposed to be spreadin’ the wealth now?

    Ingrate.

  5. It’s not very comforting to see Los Angeles following Detroit’s lead.

  6. The problem with everything in LA is that it’s geographically way too big. LA city, county, and school districts are larger apparatuses serving screwing more people than some states. The only thing that the scale maintains is corruption.

  7. It’s not very comforting to see Los Angeles following Detroit’s lead.

    Well, those of us on the opposite end of the brain drain out of Detroit and California think it’s pretty cool. We get lots of talented people. The only problem is they have a tendency to bring the nanny state with them. They must be constantly reminded the reason they have jobs is because Texas ain’t like the places they left.

  8. As local and state governments become hard-pressed for revenue we’ll see more and more of this sort of thing. Someone termed it peon squeeze. “Got a few grains of rice, dude? Cough ’em up.” (or squeeze ’em out.)

  9. I guess they may need to move to Texas.

  10. Dammit, Warty, I thought I was gonna enjoy my lunch!

    FTA — And in exchange for liberty it offers security: the “right” to health care; the “right” to housing; the “right” to a job-although who needs that once you’ve got all the others?

    Right.

  11. The sovereign extends its arms about the society as a whole; it covers its surface with a network of petty regulations-complicated, minute, and uniform-through which even the most original minds and the most vigorous souls know not how to make their way? it does not break wills; it softens them, bends them, and directs them; rarely does it force one to act, but it constantly opposes itself to one’s acting on one’s own ? it does not tyrannize, it gets in the way: it curtails, it enervates, it extinguishes, it stupefies, and finally reduces each nation to being nothing more than a herd of timid and industrious animals, of which the government is the shepherd.

    I need to reread de Tocqueville.

  12. That de Tocqueville quote sounds like a perfect description of what the soi-disant libertarian paternalists like Cass Sunstein push.

    No thanks.

  13. This guy should be arrested as a terrorist for disputing the need for revenue.

  14. It’s not very comforting to see Los Angeles following Detroit’s lead.

    On the contrary, i find it highly amusing.

  15. Warty, how’d you get your hands on Obama’s playbook?

  16. EJM, I guess, but I share T’s concern that all these people fleeing high-tax jurisdictions will push the same shit here and in twenty years I’ll have to move to another state to get a job.

  17. “He is working off the misguided assumption he will be ALLOWED to take his business out of the state. MWUUUUHAHHAHAHAAHAHAHAAAA!!!!!”

    Hey, that’s could be a plot for a movie.

    “Escape from LA” will feature the return of Snake Plisskin (played by Tim Geithner this time) leading an intrepid band of tax cheats out of LA – and into positions in the Obama adiminstration where they are all immediately granted immunity for all past sins

  18. EJM, I guess, but I share T’s concern that all these people fleeing high-tax jurisdictions will push the same shit here and in twenty years I’ll have to move to another state to get a job.

    Thankfully, the state income tax is off the table for the foreseeable future. And the Lege is gone for another year and a half, so we’re safe for a while.

  19. Chicago, New York, Atlanta, Los Angeles; Each city is in its own death spiral of spending that will result in rapid abandonment of the urban landscape, just like (you guessed it) Detroit. The exception being those on public assistance (which used to be very lucrative in California – I suspect that is going to change too.) I believe I read this in Reason (loosely quoted) “you know its bad in California when even illegals don’t want to live there..”

  20. but I share T’s concern that these people fleeing high-tax jurisdictions will push the same shit here

    Nevada can assure you that the source of your concern is not purely theoretical.

  21. Thanks for sharing that link Warty.

  22. It’s not very comforting to see Los Angeles following Detroit’s lead.

    Yeah, but at least L.A. will have palm trees among the ruins.

    I assume that Mr. Newcombe will simply move his business to another jurisdiction within the L.A. region, rather than going out of state. Assuming, that is, that any of the other jurisdictions have more rational tax policies.

  23. I expect the leftists who roam these boards to soon appear with condemnations for us resembling:

    A) You’re unpatriotic
    B) You’re cheap
    C) You’re greedy
    D) You’re irresponsible
    E) You’re heartless
    F) [Insert leftists cliche about not paying taxes]

  24. Uhhh….ex post facto clause any one? (sound of crickets).

    Run….run far, far away from the epicenter of the great state of insanity.

    Wyoming or Montana are looking better and better every day. Shit like this is bound to start happening on a grand scale here in Washington.

  25. Change you can get bent over by.

    It’s time for 1000% retro-active tax on Democrats. They constantly whine they want to pay higher taxes; it’s time for them to put their money where their mouths are.

  26. This is yet another in the long line of attempts by Reason and all the rest to deceive you by failing to mention what brought L.A. or CA to its current position. Those pushing things like those mentioned in the article didn’t gain power in a coup, they gained power due in large part to MassiveImmigration. That’s increased spending and built up a power base for people like Antonio Villaraigosa.

    Reason should just be honest: their policies have failed, and failed miserably.

    P.S. In case anyone replies to this, their responses will almost assuredly be ad homs, thereby conceding my points and showing the childish, anti-intellectual nature of libertarians.

  27. Shut the fuck up LoneWacko.

  28. Let’s just save some time, effort and frustration. Jettison California into the Pacific. Let them be their own country. They already think (and act like) they are. Let’s just make it official.

    Villaraigosa: Libertarian policies have not failed because they have not been tried on a real, committed level. When they have been tried, they are generally limited and/or abandoned when they don’t prove conducive to the expansion of power and profit for the politicians and so-called ruling elite.

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