New Research Shows Millionaires Less Mobile than the Rest of Us

   0   0 Blog, Race to the Bottom, Tax Wars

CTJFrom Citizens for Tax Justice, a blog that’s worth reproducing in full, as yet more useful ammunition to wheel out against those who keep banging on about tax cuts and so-called ‘competitiveness.’

New Research Shows Millionaires Less Mobile than the Rest of Us

A new study (PDF) released today provides the best evidence yet that progressive state income taxes are not leading to any meaningful amount of “tax flight” among top earners.

Stanford University researchers teamed with officials at the Treasury Department to examine every tax return reporting more than $1 million in earnings in at least one year between 1999 and 2011.  They found that while 2.9 percent of the general population moves to a different state in a given year, just 2.4 percent of millionaires do so.  Even more striking is that for the most “persistent millionaires” (those earning over $1 million in at least 8 years of the researchers’ sample), the migration rate is just 1.9 percent per year.  As the researchers explain: “millionaires are not searching for economic opportunity—they have found it.”

The researchers examined the specifics of where those few migrating millionaires decided to relocate.  They found that “outside of Florida, differences in tax rates between states have no effect on elite migration. Other low-tax states, such as Texas, Tennessee, and New Hampshire, do not draw millionaires from high-tax states.”

In other words, Florida is only one of the nine states without broad-based income taxes that seems to possess any kind of special allure for high-income taxpayers.  Given that reality, the study notes that “It is difficult to know whether the Florida effect is driven by tax avoidance, unique geography, or some especially appealing combination of the two.”  In any case, this study refutes the notion that repealing state income taxes can transform a state into a magnet for high-income taxpayers: it’s simply not playing out that way in eight of the nine states without such a tax.

None of this should be terribly surprising.  By definition, high-income taxpayers are already living comfortably.  A very small minority of them may be willing to uproot their lives in search of an even better bang for their buck, but they are the exception rather than the norm.  In fact, even when the researchers narrowed their focus to less disruptive migration options—moving just across a state border in regions where notable differences in tax rates exist—they were unable to find a meaningful tax effect in either the short- or long-term.  Despite the mythology, high-income earners do not simply pack their bags and leave in search of locales that will allow them to chip in less for public investments. 

This research, of course, should all but kill the thesis that you just have to cut taxes on rich folk for fear they’ll flee to more hospitable climes. But this thesis is just too convenient for too many wealthy people, and it’s been successfully put out of its misery many times before – then sprung back to life the next time around. This isn’t the last we’ve seen of it.

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