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California's Gov. Jerry Brown has just signed on to a labor-backed ballot initiative to raise tax income tax rates to as high as 13.3%, and so far the voters seem to approve. A new Los Angeles Times poll puts public support for the plan at 64%. If the measure wins in November, California will hold the prize for the highest income tax rates in the nation.

That is, if some other state doesn't jump past it before then.

In recent years, the country has seen something of a tax-the-rich derby among states enacting so-called "millionaires' taxes" on top earners. Hawaii, New Jersey, New York, Oregon and Maryland all raised rates on high earners during in the 2000s. California's rates were high already.

In some cases the taxes were temporary, in others, not. And you didn't always have to be earning a million dollars to feel the bite. As of January 2012, according to data from the Tax Foundation, Hawaii was the top taxer with a rate of 11% on incomes over $200,000 (for single filers). California was close behind with 10.3% on incomes over $1 million. New Jersey has let a 10.75% tax lapse, but its top rate was still a relatively high 8.97%. Oregon's temporary 11% tax was history, but the top rate was still 9.9%. In New York, Gov. Andrew Cuomo resisted pressure to keep a top rate of 8.97% in effect, but the state ended up with a tax only slightly lower 8.82% on incomes over $1 million.

If Brown's initiative succeeds in California, taxes will rise to 12.3% for single filers at $500,000 and for joint filers at $680,000. Another 1% a tax approved voters in 2004 for mental health programs kicks in at $1 million. The total top rate of 13.3% would put California ahead of New York City, where state and city income taxes top out at just below 12.5%. California also would raise already-high sales tax rates.

What would happen then? In the short term, the state would get some new revenue. In the longer term, the impact gets murkier because a new question arises: What will this tax do to the state's economy

This is where the real arguments start. States that hike taxes sharply on the rich are, in effect, conducting an experiment in taxpayer behavior. They are testing just how much people are willing to pay to stay in one state before the tax burden makes them relocate to states with a low income tax or none at all.

Wealth is mobile enough to have at least some people worried. As Calif. GOP State Sen. Bob Huff has put it, "There's nothing more portable than a millionaire and his money.

Even among the more tax-friendly Democrats, there are murmurs of concern. California State Treasurer Bill Lockyer in 2011 told the Sacramento Press Club he was worried about tax flight: "The risk is (the rich) may decide to live and work out of one of their other houses (in another state)," he said. "And then very quickly we lose a substantial source of income.

In California, one of those "other houses" might be in Nevada, which has no income tax at all. In a high-tax Eastern state such as New Jersey, it might be in neighboring Pennsylvania, where the top rate is just 3.07%. Or it might be in more distant Florida, with no income tax at all.

Read more from the original source:
Calif. Eyes Tax Hike To Top In Nation; Will Wealthy Flee?