Seattle Mayor Katie Wilson recently dismissed concerns about wealthy residents leaving Washington over higher taxes with a simple “bye.” The remark was meant as confidence. It revealed something else—one of the most persistent errors behind progressive tax policy: the assumption that productive people are interchangeable, that capital is captive, and that wealth will continue flowing into government coffers no matter how it is treated.
The comment came in the context of Washington’s newly-enacted 9.9 percent tax on incomes over $1 million. When asked whether wealthy residents might actually leave, Wilson shrugged it off. The audience cheered. Even some Democrats publicly criticized the tone, with former state senator Reuven Carlyle warning that Seattle has no “inherent constitutional right” to a vibrant tech economy—it has to be earned.
Production Comes Before Redistribution
Every dollar the government redistributes must first be produced. Before tax revenue, there must be profits. Before wages, there must be investment. Before public spending, there must be private production. This sounds obvious, yet policymakers routinely treat the productive economy as permanent and self-sustaining—a reliable machine that can be taxed harder without affecting output.
Lost in most redistribution debates is a more fundamental question: where did the wealth come from in the first place? The Austrian economists understood that prosperity is not the result of government programs but of countless individuals making decisions under uncertainty. Entrepreneurs risk capital on new ideas. Investors provide funding with no guarantee of success. Businesses hire workers in anticipation of future demand that may never materialize. Economic growth emerges from this process of trial and error, not from political decree. When politicians focus exclusively on redistribution while ignoring the conditions that enable production, they begin undermining the very wealth they hope to divide.
Capital Has No Loyalty
Capital flows toward opportunity and away from obstacles. Businesses expand where taxes are lower and the expected return justifies the risk. Investors allocate money where it is most likely to be productive. Entrepreneurs build where their efforts will be rewarded rather than punished. This is not ideology—it is simply how incentives work.
The evidence in Washington is already accumulating. Starbucks announced a $100 million investment and 2,000 new jobs in Nashville rather than Seattle. Fisher investments relocated to Texas. Jeff Bezos moved to Florida. These are not coincidences. They are rational responses to a policy environment that increasingly signals hostility toward wealth creation.
The Calculation Error
Ludwig von Mises argued that economic decisions are made by individuals responding to incentives, and that when policymakers ignore those incentives, their calculations diverge from reality. This is the core of what he called the socialist calculation problem—not merely that central planners lack information, but that there is no private property in the means of production. This means that there can be no rational allocation of resources.
A politician looking at a successful business owner sees a source of additional tax revenue. An entrepreneur sees the same policy and asks a different question: Is it still worth investing here? Should future expansion happen in this state or somewhere else? The politician assumes behavior remains unchanged after a policy is implemented. The entrepreneur decides whether it does. Expected tax revenue exists only if the underlying economic activity continues—and productive people are not fixed objects.
The effects are rarely immediate. A business doesn’t relocate overnight over a single policy. The damage is gradual and quiet: expansion plans shift elsewhere, new investment slows, entrepreneurs choose different cities for their next venture. By the time the consequences are visible in slower growth and a shrinking tax base, the politicians responsible are usually blaming external forces rather than their own decisions.
Mayor Wilson may view departing millionaires as insignificant, even desirable. But capital, investment, and jobs have no obligation to stay where they are unwelcome. They rarely announce their departure in advance. And unlike a mayor waving goodbye at a podium, they don’t come back for the applause.
