Another Lie Debunked: People Don’t Leave States With Higher Taxes On The Rich

A lot of these conservative tropes fall apart when you apply some basic common sense. Imagine being really rich. You probably live somewhere that you like quite a lot -- otherwise, what's the point of being wealthy? You've established a life in that place, and no doubt value the community, the local school system, your friends, the local climate, amenities, etc.

The idea that a very modest tax hike would cause you to up and move your whole family just to save a few dollars on your tax bill seems silly on its face.

And it is:

Anti-tax advocates contend that higher taxes on the wealthy lead to millionaire flight. They say this has been seen in Maryland, Rhode Island, New Jersey and New York. The rich are mobile, they say. They can take their money, taxes and jobs wherever they are treated best.

But a new study focusing on New Jersey provides some of the most detailed evidence yet that so-called millionaire taxes have little effect on the movements of millionaires as a whole.

The study, by sociologists Cristobal Young at Stanford and Charles Varner at Princeton, studied the migration patterns of New Jersey’s millionaires before and after 2004, when the state imposed a “millionaire’s tax” that raised rates on those earning $500,000 or more to 8.97% from 6.37%.

The study found that the overall population of millionaires increased during the tax period. Some millionaires moved out, of course. But they were more than offset by the creation of new millionaires.

The study dug deeper to figure out whether the millionaires who were moving out did so because of the tax. As a control group, they used New Jersey residents who earned $200,000 to $500,000–in other words, high-earners who weren’t subject to the tax. They found that the rate of out-migration among millionaires was in line with and rate of out-migration of submillionaires.  The tax rate, they concluded, had no measurable impact.

“This suggests that the policy effect is close to zero,” the study says.

Earlier this month, the Political Economy Research Institute at the University of Massachusetts (PERI) released a study by Jeffrey Thompson that concluded that the availability of jobs, rather than relative levels of taxation, is the leading factor that causes people to move from one state to another. It also found "that the impact of taxes on cross-state migration is very weak."

Other factors—primarily employment and family concerns—provide the main reasons that families move. And family ties, comfort with their community, jobs, the costs of moving, and valuing the public services in their state are why families stay put, regardless of their state's tax rates.


Thompson's analysis finds that employment opportunities in a state have the strongest influence on migration—people tend to move into states with lower unemployment rates, and out of states where jobs are scarce. Similarly, affordable housing markets, low levels of property crime, and higher median incomes attract people to a state.

But it's always a mistake to look at taxes in isolation. They pay for public goods, and Thompson found...

... that public services can influence cross-state migration. By increasing higher-education enrollment, decreasing property crime, or improving housing affordability, for example, states can attract and retain people. "Regardless of how they feel about the tax itself, people value the public services paid for with those taxes," said Thompson.

So, it's entirely possible that higher tax rates, spent on better public services, can actually attract people to a state -- the diametric opposite of the conservatives' go-to narrative on state taxes.


AlterNet / By Joshua Holland

Posted at April 22, 2011, 9:19am

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