If I happen to be a liberal politician and want to increase my populist outreach I will do one thing: Rail against the greed of corporations and call for their taxation. I would probably use inflammatory language and point out how their CEO makes 100x more than their lowest paid worker. Chances are I will ride a wave of populism into office. If enough politicians follow suit, especially during a time of an economic crisis, we will have enough legislators in office to pass a 10% increase in corporate taxes. This will make all the voters feel empowered, and increase my chances for reelection. And we all lived happily ever after.
You should have expected any story to begin with me being a liberal politician to be fictional. Here is how it would really go down:
After the tax gets enacted, the CEO of
looks around and say to himself, (Yes the CEO of the evil company is a guy) "While I would love to continue to produce services in this nation/state/municipality, I have a responsibility to the evil shareholders who are only interested in money *gasp*, so I will move my factory/office/headquarters from this unfavorable tax environment." Due to a company leaving California, there is a sudden spike in unemployment, and the voters grab their torches and go to the door of the liberal politician to demand accountability. The voters break into his house and in a dramatic act of revenge, that would later be portrayed on the silverscreen, literally throw the bum out and install a wise business oriented conservative. And we all lived happily ever after.
While I definitely like this ending a lot more it is also far from the truth. Let's continue, shall we?
The conservative enters office with a cheery disposition and a can do attitude. He cuts taxes on businesses (Yes the conservative politician is also a guy, deal with it), to bring back lost jobs. The CEO has a little chat on the telephone with the conservative politician that goes something like this:
Politician: Hey, now that taxes are down, you want to leave China/Wyoming/Eureka and come back to the United States/California/San Francisco.
CEO: Well... how do I know that the tax rate won't go back up again?
Politician: As long as I am in office, I won't increase taxes on you.
CEO: And what if you lose your bid for reelection to a liberal?
Politician: (Fingers crossed) That will never happen... *wince*
CEO: Let's say I am stupid enough to take you at your word, moving is expensive, and besides the minimum wage is much cheaper here, is there anything you can offer me to entice me to move back?
Politician: It's... the... right thing to do? *click* Hello?... You there?
The story then takes a turn for the worse and the conservative caves in to the demand of the now-unemployed voters and increases welfare spending, further increasing the tax burden on the now-scarce companies, causing them to leave the tax environment for fairer pastures. The previously deposed liberal is elected on a wave of populist anger, and the downward spiral continues.
And the moral of the story is: If you increase your rent, people will leave and probably never come back.
This theory can be applied to thousands upon thousands of political issues such as global warming (increasing emission standards for factories who then move to China), and unionization (workers unionizing against pay cuts which forces companies to move to China for ununionized labor). This wasn't such a big problem when moving costs were prohibitive, however now with cheap internet access across the world, such moves can be done long before the implementation of a crippling tax.