I’ll preface with I fall more towards your view. But the following is the economic orthodoxy view.
I’ll give an example in property terms because it’s high capital and we’re all familiar with it these days. I’m using a simplified example for simplicity. Real businesses will be a lot more marginal difference.
10 years ago you bought a house with cash for $500k. Today the house is worth $1M. Your profit is $50k (5% yield) per year on rent after costs. The government decides to double your tax rate. Next year you’ll only profit $25k. You decide to sell and and buy somewhere else with lower tax. As long as you can sell for more than $500k (25k at 5% yield and the old tax rate in the new location) you’ll make more money by moving.
Similar logic would work in low capital industries where you can stop selling here and start selling in a new market that has a lower tax rate where you didn’t sell before or didn’t sell as much. Even if it’s a poorer market. As long as you sell your product for more than half the taxable profit your net positive.
I’ll preface with I fall more towards your view. But the following is the economic orthodoxy view.
I’ll give an example in property terms because it’s high capital and we’re all familiar with it these days. I’m using a simplified example for simplicity. Real businesses will be a lot more marginal difference.
10 years ago you bought a house with cash for $500k. Today the house is worth $1M. Your profit is $50k (5% yield) per year on rent after costs. The government decides to double your tax rate. Next year you’ll only profit $25k. You decide to sell and and buy somewhere else with lower tax. As long as you can sell for more than $500k (25k at 5% yield and the old tax rate in the new location) you’ll make more money by moving.
Similar logic would work in low capital industries where you can stop selling here and start selling in a new market that has a lower tax rate where you didn’t sell before or didn’t sell as much. Even if it’s a poorer market. As long as you sell your product for more than half the taxable profit your net positive.