WASHINGTON – Americans for Tax Reform (ATR) applauds the unanimous decision rendered by the Supreme Court on April 23, 2003 preventing states from pursuing individuals and businesses that leave to set up residence in another state with a more favorable business climate and tax structure. The U.S. Supreme Court affirmed the Nevada Supreme Court\’s ruling stating that the "Nevada Supreme Court sensitively applied comity principles with a healthy regard for California\’s sovereign status, relying on the contours of Nevada\’s own sovereign immunity from suit as a benchmark for its analysis."
For example, because of harsh environmental, labor, and tax laws, including the highest marginal income tax rate in the country, California has become the least attractive among all fifty states in which to do business. In order to avoid these costly and obtrusive burdens, entrepreneurial and wealthy Californians have departed for such states as Colorado and Nevada. Those states have fostered a favorable business climate, and they aggressively recruit California refugees.
Instead of improving California\’s own business environment, Governor Gray Davis and the Democratic run State Legislature attempted to extend their regulatory and tax collection reach beyond their own borders by authorizing the California Franchise Tax Board (FTB) to begin systematic searches for former residents and, through residency audits, attempt to prove that their postpartum income is, for one reason or another, still taxable in California. Once these individuals have been targeted the FTB crosses state lines to monitor certain refugees\’ apartments, rummage through their garbage, and threaten to publicize personal information that the FTB had obtained, on a promise of confidentiality, in an attempt to procure a financial settlement for income taxes that were never owed.
"The California FTB\’s conduct is immoral," said Grover Norquist, President of ATR. "Instead of providing a more favorable business climate by reforming their tax code and removing erroneous regulations, Governor Davis and the FTB, in their never ending quest to squelch their thirst for more tax revenue to expand government, used their powers to try to intimidate former residents into paying large tax settlements that are no longer owed to California. The Supreme Court\’s decision put an end to those methods and reaffirmed the genius of America\’s competitive federalism by continuing to allow citizens and businesses to choose their own state."