It's a simple economic principle: raise the cost of a product and fewer people will be willing to buy it. Taxes raise the cost of one such product: the cost of living and working.

Source: Wall Street Journal / Opinion Journal

 
Not all taxes are bad. Some actually promote private wealth and prosperity. Roads in early America and later the railroads all brought greater economic development and value to the country. The Interstate Highway system greatly increased prosperity and paid for itself many, many times over. Living in a country where citizens feel safe (taxes keep a standing army) or safe in a community (police and fire protection), all promote prosperity for the common good.
 
At some point, taxes become excessive and start to strangle the economy. That crossover point, that "tipping point," is the apex of the Laffer Curve, which I previously mentioned here. This is one of the primary reasons that cutting high taxes can so positively stimulate the economy.
 
How do you know which side of the curve you are on?
 
An article in today's Wall Street Journal / Opinion Journal, Soak the Rich, Lose the Rich, by Arthur Laffer (yes, the originator of the Laffer Curve) and Stephen Moore, demonstrates the dramatic differences in the prosperity of states with low taxes compared to those with high taxes. Please do read the entire article. Every word is a word of wisdom.
 

 
Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.
 
And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.
 
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.
 
Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.
 

 
The authors draw some conclusions from the data, including:
 

 
We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.
 

 
Finally:
 

 
One last point: States aren't simply competing with each other. As Texas Gov. Rick Perry recently told us, "Our state is competing with Germany, France, Japan and China for business. We'd better have a pro-growth tax system or those American jobs will be out-sourced." Gov. Perry and Texas have the jobs and prosperity model exactly right. Texas created more new jobs in 2008 than all other 49 states combined. And Texas is the only state other than Georgia and North Dakota that is cutting taxes this year.
 
The Texas economic model makes a whole lot more sense than the New Jersey model, and we hope the politicians in California, Delaware, Illinois, Minnesota and New York realize this before it's too late.
 

 
Looking at all the opportunities presented to us, Garland stands to do well in the future if we continue to plan for the future and success, and we become even more competitive among Texas cities, especially in the Metroplex.
 
We are the tenth largest city in the state, with one of the largest industrial sections in the state. Many products are manufactured here that are in international demand but are produced nowhere else. We have a skilled workforce and will very soon have a state-of-the-art campus to train more. We are adjacent to Dallas, the "heart" of the fourth largest metropolitan area in the country. We are part of the regional light rail system. We have the critical locus of transportation modes necessary for continued development, with improvements coming. We have our own power company, Garland Power & Light. We have excellent utility services across the board. We are working to aggressively improve our Development Codes. Our retail sector is growing and will continue to grow with an improving economy. This is by no means a complete list.
 
We are well positioned to continue to grow and prosper, both in terms of a growing state and a growing region. As energy costs rise, those costs will also drive more and more people and investment toward our community. About the only way to kill our opportunities is to not compete with the cities that surround us, locally and regionally, and to make it more costly to do business and to live here than those other communities.
 
I see it all as a no-brainer.