With the federal debt growing exponentially and a massive new entitlement (Obamacare) on its way, all Americans will be saddled with more expensive government and higher tax bills, no matter where they live. This is all the more reason for states to keep their share of the tax burden as low as possible.
To that end, we offer a reminder that there's a limit to how much people are willing to pay for government. For 50 years, the cost of government was 35 to 37 cents of every dollar of income. The amount went up and down from year to year but rarely strayed from the 35-37 range.
A seminal book published in 2004 by David Osborne and Peter Hutchinson makes the case that government spending should be based on what the people think they can afford. The Washington, D.C., and California models have it backward: Increase spending and then find ways to pay for it, through borrowing (Washington) or higher taxes (California). “The price Americans are willing to pay for government is relatively fixed,” Osborne and Hutchinson wrote.
Domiciles, though, aren't fixed. Tax policy compels some people to take a hike.