No, the vast majority of the rich don’t move to flee taxes
by David Atkins
James Stewart in the New York Times has a good reminder today about the undying GOP zombie myth that the rich flee increased taxes in droves:
But it’s not the case. It turns out that a large majority of people move for far more compelling reasons, like jobs, the cost of housing, family ties or a warmer climate. At least three recent academic studies have demonstrated that the number of people who move for tax reasons is negligible, even among the wealthy.
Cristobal Young, an assistant professor of sociology at Stanford, studied the effects of recent tax increases in New Jersey and California. “It’s very clear that, over all, modest changes in top tax rates do not affect millionaire migration,” he told me this week. “Neither tax increases nor tax cuts on the rich have affected their migration rates.”
The notion of tax flight “is almost entirely bogus — it’s a myth,” said Jon Shure, director of state fiscal studies at the Center on Budget and Policy Priorities, a nonprofit research group in Washington. “The anecdotal coverage makes it seem like people are leaving in droves because of high taxes. They’re not. There are a lot of low-tax states, and you don’t see millionaires flocking there.”
Despite the allure of low taxes, Mr. Depardieu hasn’t been seen in Russia since picking up his passport and seems to be hedging his bets by maintaining a residence in Belgium. Meanwhile, Russian billionaires are snapping up trophy properties in high-tax London, New York and Beverly Hills, Calif. “I don’t hear about many billionaires moving to Moscow,” said Robert Tannenwald, a lecturer in economic policy at Brandeis University and former Federal Reserve economist. Along with Nicholas Johnson, he and Mr. Shure are co-authors of “Tax Flight Is a Myth,” a 2011 research paper.
It turns out that global celebrities and the extremely wealthy do occasionally move to avoid taxes, but that the vast majority of the wealthy do not. The high-profile cases make for big news, but poor tax policy:
In 2009, just 364 people in the millionaire bracket moved from Maryland or died (the data didn’t distinguish between the two) — about the same percentage who disappeared in 2007, before any tax increase. And in 2009, more than 1,500 taxpayers entered the millionaire rolls, either because they earned more or moved to Maryland that year. That data “directly contravenes the notion that changes in tax policy were discouraging the affluent from working hard and earning substantial sums of money, or driving them out of the state altogether,” the study concluded.
Professor Young said his study looked at every millionaire tax record filed in California over the last 20 years, and “neither tax increases nor tax cuts on the rich have affected their migration rates.” He said that the two major tax overhauls before the recent increase didn’t have any effect on migration rates of millionaires. “Among the very richest, people making more than $2 million, out-migration actually declined slightly after the 2005 millionaire tax,” he said.
Why didn’t they move? Professor Young said that for most people, even the very affluent, it’s not that easy, since most successful businesses and high-paying jobs are tied to specific locations. In addition, “entrepreneurship and earning power are clustered in highly competitive regions like Silicon Valley, Los Angeles and New York City,” he said. “People making over a million are typically close to their peak income years, and are enjoying the fruits of long-term career investments. This is hard to walk away from.”
His research in New Jersey found that, while some people left, any lost revenue was more than made up for by added revenue from people who stayed. He estimated that New Jersey’s 2004 tax increase on incomes over $500,000 raised nearly $1 billion a year, “with little cost in terms of tax flight.”
Mr. Shure added, “I can say flatly that no state has ever raised taxes and lost money.”
Yet the tax flight myth remains surprisingly persistent, fanned by media coverage of celebrities, who are among those most likely to have the means and motive to choose a home based on tax considerations. “You can always find an anecdote.” Mr. Shure said. “Many people want this to be true as a way to discourage tax increases. The rich are always trying to find ways to make the middle class make their arguments for them.”
Bookmark it to send to your right wing uncle. This is one zombie lie that difficult to put down, but the data is there for all to see.
.