Keep the jet in the hangar: Study shows rich stay put in high-tax states

May 16, 2011 | Alex Stone

A recent study titled “The Impact of Taxes on Migration in New England” says that employment, family and education are the three primary reasons people (wealthy or not) move from one state to another. Taxes have little – if anything at all – to do with it: “Taxes [have] essentially no impact on causing people to leave a state,” according to Jeff Thompson, study’s author.

This study mirrors the findings of other, similar research and statistical data – though that hasn’t stopped the ‘chicken-littles’ of the world from using sky-is-falling economic extortion to argue wealthy people exit high tax states. Typically, such stances ignore underlying factors – like a recession – that cause people to lose wealth (in other words, they’re no longer millionaires, just high six-figure types).

Even a cursory look at the data indicate wealthy people don’t jump in their private jets and fly to North Dakota when their home state raises tax rates:

  • 3 of the states with the highest top marginal income tax rates (NJ, CA, and HI) have higher percentages of households with incomes above $200,000 and higher average incomes for the top 5% of household than any of the 7 states with no income tax.
  • The California Budget Project notes that California imposed a temporary tax increase on high earners from 1991 to 1995, and the number of millionaire filers increased by 33.4%. Another high-income tax hike was implemented in 2005, and the number of millionaire filers increased by 37.8%.
  • When New Jersey increased tax rates on income over $500,000 in 2004, millionaires left the state at the same rate as those unaffected by the tax. In addition, the total number of high-income filers increased in New Jersey from 2004 – 2006, and the state received a $1+ billion revenue gain as a result.

Millionaires may be more mobile because of their wealth, but like most other people, they tend to choose proximity to family, job location and quality of life over tax rates.

NPR has a great summary of the new study here.

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Posted in An Inclusive Economy

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