I recently used economist Albert Hirschman’s Exit, Voice, and Loyalty to explain why Jacinda Ardern, the former prime minister of New Zealand, quietly relocated her family to Sydney. When 43,000 mid-career Kiwis choose exit over voice, and a co-architect of the system joins them, something structural is broken.
This framework is also visible in the United States.
Hours after the Washington state House passed SB 6346 last week, a 9.9 percent income tax on earnings above one million dollars, “Coffee King” Howard Schultz announced on LinkedIn that he and his wife Sheri were moving to Miami. Schultz is 72. He bought Starbucks in 1987 and built it from a handful of Seattle coffee shops into one of the most recognized brands on earth. He is a lifelong liberal. He considered running for president as an independent. He is not fleeing blue-state politics out of ideological spite. He is making a calculation.
That calculation is Hirschman’s, and in the American context it is sharper than the New Zealand version, because America has something New Zealand does not: competitive federalism. Fifty states, fifty tax codes, fifty regulatory environments, all competing for the same residents, the same businesses, the same tax base. When Ardern’s New Zealanders chose exit, they had to cross an ocean. When Schultz chose exit, he only had to book a flight to Florida.
To Hirschman, himself an impassioned social observer who fled Hitler’s Germany and found a career at Columbia and Harvard, exit and voice exist always in tension. The easier it is to leave, the less likely people are to stay and fight for change. In America’s federal system, exit between states is extraordinarily easy. No passport required. No work visa. No language barrier. No loss of citizenship. You hire a moving company, update your address, and you are done. This is the purest laboratory for Hirschman’s theory anywhere in the world.
And the results are running exactly as he predicted.
Washington’s new tax is framed as a modest correction. The governor calls it “rebalancing.” The sponsors say it affects only the wealthiest half of one percent of households. The projected revenue is $3.7 billion per year, earmarked for schools, healthcare, and a working families tax credit. It sounds reasonable. It always sounds reasonable.
But Hirschman would not have looked at the revenue projections. He would have looked at the moving trucks. Schultz’s net worth is estimated at $4.3 billion. His annual tax liability under SB 6346 would dwarf the average millionaire’s. And he is gone. Not to negotiate, not to lobby, not to fund an opposition campaign. Gone. To a state with no income tax, warmer weather, and proximity to his grandchildren on the East Coast. He wrapped the exit in family language. They always do. The LinkedIn post mentioned sunshine and adventure. It did not mention 9.9 percent.
It did not need to. Everyone can do arithmetic.
Starbucks headquarters will remain in Seattle, for now. But the company announced this month that it is expanding its corporate footprint in Nashville, Tennessee. Like Florida, Tennessee has no state income tax. The pattern is not subtle.
California wrote the playbook. In 2022, the state claimed a $97.5 billion surplus. By 2024, that surplus had inverted into a $55 billion deficit. What happened? The state’s revenue model depends heavily on income taxes from high earners and capital gains. When those earners leave, the model breaks. And they have been leaving. California posted net emigration of over 200,000 people in 2024 and 2025. The Tax Foundation ranks it 49th in business tax climate. Tesla moved to Austin. SpaceX moved to Starbase, Texas. Chevron, after 145 years in California, moved to Houston. Oracle went first to Austin, then Nashville. Palantir moved to Denver, then Miami. Hewlett Packard Enterprise moved to Houston. In-N-Out Burger, born in Los Angeles, moved to Tennessee. The list is long enough to fill a column by itself.
And California is not done. A proposed 2026 Billionaire Tax Act would impose a “one-time” five-percent levy on the assets of residents worth more than a billion dollars. Congressman Ro Khanna, who represents Silicon Valley, endorsed it. When Peter Thiel and Google co-founder Larry Page began making arrangements to leave the state, Khanna channeled Franklin Roosevelt’s 1936 quip about wealthy friends threatening to move abroad: “I shall miss them very much.” But Khanna borrowed the sarcasm without the substance. Roosevelt’s argument depended on a premise: there was no viable exit. In 1936, no other country offered comparable institutions at lower tax rates, so the threat to leave the United States was empty. In 2026, zero-income-tax Florida is just a three-hour flight away, and Nashville is recruiting your corporate headquarters. The premise has collapsed. The threat is not empty. The moving trucks are real.
The response from Khanna’s own donors was immediate. Martin Casado, a partner at venture capital firm Andreessen Horowitz who had supported Khanna financially, wrote that he had “done a speed run alienating every moderate” who backed him. Palmer Luckey, the Anduril industrial co-founder, warned that the tax would force founders to sell large pieces of their companies. Khanna now faces a primary challenge from a tech entrepreneur. The congressman who represents the most productive square miles on Earth told the people who made those miles productive that their departure was a joke. Hirschman could not have designed a cleaner experiment. When voice is mocked, exit accelerates.
The seen, as Bastiat would put it, is the revenue projection: $3.7 billion a year for Washington, earmarked for schools and working families. The unseen is the tax base walking out the door, one founder at a time. California’s Legislative Analyst’s Office now projects structural deficits of $20 to $30 billion annually through the end of the decade. The surplus is gone because the people who generated the surplus are gone.
The pattern is not merely American. Sweden ran a wealth tax for decades. Revenue never exceeded 0.4 percent of GDP. Meanwhile, the Swedish Tax Authority estimated that over 500 billion kronor in assets were transferred offshore, and Swedish billionaires accumulated fortunes of at least that size abroad. Sweden abolished the tax in 2007. France ran its Solidarity Tax on Wealth from 1988 to 2017. In that time, an estimated 60,000 millionaires left the country and roughly 200 billion euros in capital fled. Macron repealed the tax in 2018. Nine of the twelve European countries that tried wealth taxes eventually abandoned them. The irony is not lost on anyone paying attention. American progressives routinely point to Europe as a model for enlightened policy. On wealth taxes, Europe tried it, measured the damage, and walked away. Washington state is now adopting the policy that Stockholm repealed. The lesson is always the same: the projected revenue assumes the tax base will sit still. It never does.
This is where competitive federalism turns Hirschman’s framework into something close to an iron law. In a single-country system like New Zealand, exit is expensive. You leave your networks, your family, your culture, your professional credentials. Loyalty holds. People stay and use voice far longer than the economics would suggest is wise. But in a federal system with fifty jurisdictions and no barriers to movement, the cost of exit drops to nearly zero for anyone with capital. Voice becomes irrational. Why spend years lobbying your state legislature when you can spend an afternoon on Zillow?
The politicians know this. That is why SB 6346 does not take effect until 2028, with first payments in 2029. The delay is not administrative. It is strategic. It gives legislators two election cycles before the bill comes due. By the time the revenue shortfall becomes visible, the people who voted for the tax will be running for reelection on other issues. This is the political version of what Hirschman described: exit and voice operate on different timelines. The vote happens today. The moving truck arrives next quarter.
Schultz, to his credit, said the quiet part almost out loud. In his LinkedIn post, he expressed his hope that Washington would “remain a place for business and entrepreneurship to thrive.” That is voice. It is also, recognizably, the last voice of a man who has already chosen exit. He is speaking from the departure lounge.
What makes the American case so instructive is the receiving states. Florida, Texas, and Tennessee are not just benefiting passively from other states’ policy mistakes. They are actively competing. No income tax. Lower regulation. Recruiting campaigns aimed at exactly the professionals and entrepreneurs that California and Washington are taxing away. This is competitive federalism working as designed: not as a theoretical abstraction, but as a sorting mechanism. States that tax heavily lose their most mobile residents to states that do not. The mobile residents bring their businesses, their employees, their spending, and their philanthropy to places where capital is productive and property rights are respected.
Hirschman understood that this dynamic has a ceiling. At some point, the people left behind, the ones who cannot afford to move or whose lives are too rooted to relocate, comprise the entire constituency. They have no exit option. They can only use voice. But their voice is directed at a government that has already lost the tax base it needs to deliver what they are demanding. The result is a fiscal spiral: higher taxes on a shrinking base, which accelerates exit, which shrinks the base further. California is deep into this spiral. Washington just entered it.
Ardern left New Zealand for Sydney. Schultz left Seattle for Miami. The frameworks are different. The calculus is identical. When the cost of staying exceeds the cost of leaving, people leave. The question is never whether they will. The question is how long loyalty delays the inevitable.
For Schultz, it took until the House vote.
