High Taxes do not Cause Millionaires to Flee your State

Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you:

No adverts like this in the forums anymore.
Times and dates in your local timezone.
Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance.
Email notifications for threads you want to watch closely.
Being a part of the oldest wargaming community on the net.

If you are already a member then feel free to login now.

**Easy E**

Here is the report: http://www.asanet.org/journals/ASR/Jun16ASRFeature.pdf

An overview from Slate:
http://www.slate.com/blogs/moneybox/2016/05/31/study_says_few_millionaires_really_move_to_escape_taxes.html

The gory details....

How little is there to worry about? For the average state, the authors find that a one percentage point increase in top tax rates would lead them to lose 23 millionaire families. “Because the average state has an annual millionaire population of more than 9,000, this is clearly a small effect size," they note. A 10 percent increase in tax rates would lead to a 1 percent loss in the millionaire population. In the end, they calculate that states could maximize their tax revenue with a 68 percent top rate on high earners. I wouldn't exactly take that as a hard, unimpeachable number, but it suggests New Jersey, New York, and California aren't exactly in danger of causing too many of their golden geese to migrate.

In fact, it turns out that even though the rich do seem to keep taxes in mind when they move, they're not that mobile on the whole. The paper's authors find that while there are about 500,000 millionaire households annually, only about 12,000 move between states in a given year. That 2.4 percent moving rate is much lower than what you tend to see among middle-class earners who bring home less than $40,000.

Also interesting, there are many states with no Income Tax, but they tend to still move to Florida. I guess lowering your states' income taxes won;t help you attract "job-Creators" too much.

Your thoughts?

**Sarouan**

Honestly, the belief that lower taxes bring more riches and jobs was always a myth. Many other factors play along, and that article just shows a few of them.

Not really surprised by this.

**Prestor Jon**

Most high earners are tethered to the their jobs so they're not going to want to relocate. This is dealing with income not wealth so the tax rate would need to be incredibly high to make somebody want to leave their job that pays them millions of dollars in annual salary.

What is interesting to look at is the migration rate for the population in general for high tax states. NJ isn't going to lose a lot of people earning millions in salary from work in NJ or NYC but for people like myself and my wife who grew up in NJ we couldn't afford to live in our hometowns so we left the state. It's the cost of living and the tax rates for nonmillionaires that drives people out.

**Frazzled**

Lets do a case study. Let me be the sole winner of Friday's Mega Millions and we'll find out...together!

**Monkey Tamer**

High taxes are causing middle income families to flee my State. Businesses have been relocating to friendlier areas. I can't speak for the individual earners. If you can move across an imaginary line and pay less eventually the juice will be worth the squeeze.

**Vaktathi**

For large companies and high income individuals, taxes are a distant secondary, if not tertiary concern. It certainly doesnt stop them from living and doing business in places like NY, CA, MA, etc, while one will notice that the ultra wealthy and the big companies of our era aren't exactly itching to move to low tax Kansas.

As others noted, where taxes exert real pressure is on the middle classes in various ways, but is still generally a secondary issue to other market forces like rent.

**feeder**

Low taxes lead to lower standard of living, though.

There's a reason people are paying nearly a million dollars for a 2000sqft house on a 1/8th acre lot in my city - it has a high standard of living and healthy economy. And high taxes, with quality services that go with those taxes.

**Asterios**

Vaktathi wrote:
For large companies and high income individuals, taxes are a distant secondary, if not tertiary concern. It certainly doesnt stop them from living and doing business in places like NY, CA, MA, etc, while one will notice that the ultra wealthy and the big companies of our era aren't exactly itching to move to low tax Kansas.

As others noted, where taxes exert real pressure is on the middle classes in various ways, but is still generally a secondary issue to other market forces like rent.

companies and such don't move to Kansas cause its in the middle of nowhere, meanwhile Businesses are leaving California since California is not a very business friendly state.

for instance the whole town of Oakdale in California took a major loss when the Hershey's factory moved out and thats just one business leaving that hurt a whole town,

**Vaktathi**

Asterios wrote:
Vaktathi wrote:
For large companies and high income individuals, taxes are a distant secondary, if not tertiary concern. It certainly doesnt stop them from living and doing business in places like NY, CA, MA, etc, while one will notice that the ultra wealthy and the big companies of our era aren't exactly itching to move to low tax Kansas.

As others noted, where taxes exert real pressure is on the middle classes in various ways, but is still generally a secondary issue to other market forces like rent.

companies and such don't move to Kansas cause its in the middle of nowhere,

Right, taxes are a distant consideration to more pressing priorities, such as educated workforces, amenities, shipping lanes, supplier proximity, etc.

meanwhile Businesses are leaving California since California is not a very business friendly state.

for instance the whole town of Oakdale in California took a major loss when the Hershey's factory moved out and thats just one business leaving that hurt a whole town,

businesses come and go all the time, any one business isnt a barometer of the health of the overall economy. The CA central valley has had issues for decades now, being largely built around low skill industry and Agriculture, with taxes and regulation generally being a distant concern to mechanization, foreign competition, and markets moving on to different products.The whole area has been slipping while the bay area and southern CA exploded. Its not so much that CA isnt friendly to "business", but rather just not to that kind of business. You want to be in aerospace or tech though...then CA is great for business.

The bigger issue with CA is its insane housing and rent prices pushing middle earners and some businesses out. Thats why I left, my apartment in San Diego is a $3k/month rental now, as opposed to my current rent which is about a third of that.

Also I have certain hobbies that CA isnt so friendly towards but that other states are

**Asterios**

Vaktathi wrote:
Asterios wrote:
Vaktathi wrote:
For large companies and high income individuals, taxes are a distant secondary, if not tertiary concern. It certainly doesnt stop them from living and doing business in places like NY, CA, MA, etc, while one will notice that the ultra wealthy and the big companies of our era aren't exactly itching to move to low tax Kansas.

As others noted, where taxes exert real pressure is on the middle classes in various ways, but is still generally a secondary issue to other market forces like rent.

companies and such don't move to Kansas cause its in the middle of nowhere,
Right, taxes are a distant consideration to more pressing priorities, such as educated workforces, amenities, shipping lanes, supplier proximity, etc.

meanwhile Businesses are leaving California since California is not a very business friendly state.

for instance the whole town of Oakdale in California took a major loss when the Hershey's factory moved out and thats just one business leaving that hurt a whole town,
businesses come and go all the time, any one business isnt a barometer of the health of the overall economy. The CA central valley has had issues for decades now, being largely built around low skill industry and Agriculture, with taxes and regulation generally being a distant concern to mechanization, foreign competition, and markets moving on to different products.The whole area has been slipping while the bay area and southern CA exploded. Its not so much that CA isnt friendly to "business", but rather just not to that kind of business. You want to be in aerospace or tech though...then CA is great for business.

The bigger issue with CA is its insane housing and rent prices pushing middle earners and some businesses out. Thats why I left, my apartment in San Diego is a $3k/month rental now, as opposed to my current rent which is about a third of that.

Also I have certain hobbies that CA isnt so friendly towards but that other states are

gun Hobbies?

**Vaktathi**

Mostly

The mag-locks came off...pretty much the day I moved out of state...and I now own multiple items which are Verboten in CA, so moving back would be...difficult.

**Monkey Tamer**

The bigger issue with CA is its insane housing and rent prices pushing middle earners and some businesses out. Thats why I left, my apartment in San Diego is a $3k/month rental now, as opposed to my current rent which is about a third of that.

Sweet Jesus. That's about quintuple my mortgage on the Monkey Ranch.

**NuggzTheNinja**

Easy E wrote:
Here is the report: http://www.asanet.org/journals/ASR/Jun16ASRFeature.pdf

An overview from Slate:
http://www.slate.com/blogs/moneybox/2016/05/31/study_says_few_millionaires_really_move_to_escape_taxes.html

The gory details....

Also interesting, there are many states with no Income Tax, but they tend to still move to Florida. I guess lowering your states' income taxes won;t help you attract "job-Creators" too much.

Your thoughts?

Florida is a strange case, since a lot of the millionaires that relocate there are retiring (therefore not paying income tax anymore).

**Asterios**

NuggzTheNinja wrote:
Easy E wrote:
Here is the report: http://www.asanet.org/journals/ASR/Jun16ASRFeature.pdf

An overview from Slate:
http://www.slate.com/blogs/moneybox/2016/05/31/study_says_few_millionaires_really_move_to_escape_taxes.html

The gory details....

Also interesting, there are many states with no Income Tax, but they tend to still move to Florida. I guess lowering your states' income taxes won;t help you attract "job-Creators" too much.

Your thoughts?

Florida is a strange case, since a lot of the millionaires that relocate there are retiring (therefore not paying income tax anymore).

yeah Florida is the retirement state, if you have no income then their income tax laws will not effect you.

**djones520**

feeder wrote:
Low taxes lead to lower standard of living, though.

There's a reason people are paying nearly a million dollars for a 2000sqft house on a 1/8th acre lot in my city - it has a high standard of living and healthy economy. And high taxes, with quality services that go with those taxes.

I paid $192,000 for roughly the same, in a place with significantly lower taxes then what you're paying, and I'm very pleased with my standard of living.

**d-usa**

Another thing to keep in mind is that places with low taxes just find "non-tax" ways to raise the same money.

The Oklahoma Republican controlled legislature decided that they were anti-raising taxes. So instead they passed such wonderful laws as HB 3208 this session.

HB 3208 doesn't raise taxes, but it does require that the state redesign the current license plate (which is only 8 years old) and requires everyone to purchase the new license plate. And for the next year if you buy a new license plate, which you will have to because it's a new design, you have to pay an additional $5 for each plate because the law says so (if you want to keep your old plate or have a custom plate it will cost $14). And 80% of all the money collected from these fees (the original registration cost as well as the $5) goes to a new revolving fund that the state gets to use to spend on whatever public safety project they want.

The cost to Oklahomans: $18 Million.

But hey, they didn't raise taxes!

**Monkey Tamer**

I'd gladly pay 10 bucks for my cars instead of getting a property tax hike. The cost of those new plates is a drop in the bucket compared to most tax hikes. The last time income tax went up here Illinoisans lost two weeks of pay on average to the government.

**Asterios**

Monkey Tamer wrote:
I'd gladly pay 10 bucks for my cars instead of getting a property tax hike. The cost of those new plates is a drop in the bucket compared to most tax hikes. The last time income tax went up here Illinoisans lost two weeks of pay on average to the government.

I agree an extra $5 a year or even $20 a year is a whole hell of a lot cheaper then what i'm paying on taxs, hell I have to pay a USE tax on anything I order from outside my State.

**Janthkin**

Asterios wrote:
I agree an extra $5 a year or even $20 a year is a whole hell of a lot cheaper then what i'm paying on taxs, hell I have to pay a USE tax on anything I order from outside my State.

That's true of every state that has a sales tax. For your convenience, Amazon (and some other e-tailers) are handling it for you now.

**Prestor Jon**

feeder wrote:
Low taxes lead to lower standard of living, though.

There's a reason people are paying nearly a million dollars for a 2000sqft house on a 1/8th acre lot in my city - it has a high standard of living and healthy economy. And high taxes, with quality services that go with those taxes.

Towns that require residents to be able to spend a million dollars on housing are going to be nice places to live. That's a pretty hefty buy in that requires residents to have the kind of average incomes and education levels that would keep out the riffraff.

**MeanGreenStompa**

I live in Taxachusetts and it's crawling with millionaires here on the coast.

**whembly**

I think we need to make a simple distinction that income tax is different than tax on wealth.

If the wealthy are making their $$$ via investments, rather than earning income, so of course the statement that "High Taxes do not Cause Millionaires to Flee you State".

Watch when a state raises taxes on property/weath. THEN you'll see some migration.

**Asterios**

whembly wrote:
I think we need to make a simple distinction that income tax is different than tax on wealth.

If the wealthy are making their $$$ via investments, rather than earning income, so of course the statement that "High Taxes do not Cause Millionaires to Flee you State".

Watch when a state raises taxes on property/weath. THEN you'll see some migration.

so true if someone has a billion dollars, they can live on that their entire lives and if they have no income or income below a certain amount they will never have to pay taxs.

**Ensis Ferrae**

Sarouan wrote:
Honestly, the belief that lower taxes bring more riches and jobs was always a myth. Many other factors play along, and that article just shows a few of them.

Not really surprised by this.

And yet, there are some people (some even on these fora) that still believe that myth. This is, IMO, becoming one of those issues that is like religion and politics. No amount of facts and evidence pointing to an alternate view that a person holds is going to sway them to your thinking.

**kronk**

d-usa wrote:

The cost to Oklahomans: $18 Million.

That wouldn't cover the bourbon bill on Bourbon Street for 1 night!

**Easy E**

Prestor Jon wrote:
Most high earners are tethered to the their jobs so they're not going to want to relocate. This is dealing with income not wealth so the tax rate would need to be incredibly high to make somebody want to leave their job that pays them millions of dollars in annual salary.

What is interesting to look at is the migration rate for the population in general for high tax states. NJ isn't going to lose a lot of people earning millions in salary from work in NJ or NYC but for people like myself and my wife who grew up in NJ we couldn't afford to live in our hometowns so we left the state. It's the cost of living and the tax rates for nonmillionaires that drives people out.

It is interesting you mention that as the average family making less than 50K a year is more likely to move. However, the article does not state the reasons why as it is Out-of-Scope for the article.

However, there are a few reason, with most economists agreeing (or feeling) that the presence of job opportunities is the biggest driver of people moving locations. One of the strange parts about the Great Recession is that the mortgage collapse "trapped" people in their geographic location so they could not move to try and find better opportunities. This was very different than what has happened in previous downturns.

**Asterios**

Prestor Jon wrote:
Most high earners are tethered to the their jobs so they're not going to want to relocate. This is dealing with income not wealth so the tax rate would need to be incredibly high to make somebody want to leave their job that pays them millions of dollars in annual salary.

What is interesting to look at is the migration rate for the population in general for high tax states. NJ isn't going to lose a lot of people earning millions in salary from work in NJ or NYC but for people like myself and my wife who grew up in NJ we couldn't afford to live in our hometowns so we left the state. It's the cost of living and the tax rates for nonmillionaires that drives people out.

actually funny you mentioned NJ read an article recently how they had a high wage earner leave the state because of their tax laws.

**Kilkrazy**

Obviously that one piece of hearsay anecdotal evidence completely wrecks the statistical analysis of tax data that was used in the academic article.

**Prestor Jon**

States with declining populations see issues like employment opportunities as a much stronger factor in migration than taxes. The degree to which taxes, of all their various types, impact employment opportunities is the degree to which taxes influence state populations. People will migrate to where they can work and earn a decent living.

http://www.governing.com/topics/mgmt/gov-states-losing-population-census.html

**Easy E**

Asterios wrote:
Prestor Jon wrote:
Most high earners are tethered to the their jobs so they're not going to want to relocate. This is dealing with income not wealth so the tax rate would need to be incredibly high to make somebody want to leave their job that pays them millions of dollars in annual salary.

What is interesting to look at is the migration rate for the population in general for high tax states. NJ isn't going to lose a lot of people earning millions in salary from work in NJ or NYC but for people like myself and my wife who grew up in NJ we couldn't afford to live in our hometowns so we left the state. It's the cost of living and the tax rates for nonmillionaires that drives people out.

actually funny you mentioned NJ read an article recently how they had a high wage earner leave the state because of their tax laws.

That is addressed directly in the Slate article.