Tuesday, August 9, 2011

Another Republican Talking Point Bites The Dust - Rich People Do Not Move To Avoid Taxes

Another Republican Talking Point Bites The Dust - Rich People Do Not Move To Avoid Taxes

I’ve written several times before about the notion that high state taxes drive out the rich. Studies show that from Connecticut to Maryland and New Jersey and New York there is little statistical evidence that taxes cause large numbers of rich people move to lower-tax states.

Yes, some rich people leave because of taxes. But there is no real proof that large flights of wealthy people are due to taxes.

    Associated Press

A new study helps explain why. A study by the Center on Budget and Policy Priorities, titled “Tax Flight is a Myth,”  states that “the effects of tax increases on migration are, at most, small—so small that states that raise income taxes on the most affluent households can be assured of a substantial net gain in revenue.”


Here are the main findings:

Tax Migration is not common: “On average, just 1.7 percent of U.S. residents moved from one state to another per year between 2001 and 2010, and only about 30 percent of those born in the United States change their state of residence over the course of their entire lifetime,” the study said. “When people do relocate, a large body of scholarly evidence shows that they do so primarily for new jobs, cheaper housing, or a better climate. A person’s age, education, marital status, and a host of other factors also affect decisions about moving.”

The Rich Are Not So Different: After New Jersey hiked rates on incomes over $500,000, the net out-migration of this income group accelerated. But the net out-migration rate of filers with incomes between $200,000 and $500,000 was the same. At most, 70 tax filers earning more than $500,000 might have left New Jersey between 2004 and 2007 because of the tax increase, costing the state an estimated $16.4 million in tax revenue. That compares with a revenue gain of $3.77 billion over the same period.
Weather Matters More than Taxes. Rich retirees are presumably the most mobile income group, since they’re not tied down by jobs and they can live where they please. But the study looked at rich flight from Oregon and found that weather, and a high concentration of other wealthy retirees “is much larger than the impact of the tax variable.” In other words, what rich people want is a sunny place with lots of golf partners–while taxes may be secondary.

I’m not arguing that we should or shouldn’t raise taxes on the wealthy. And there are surely rich people who move to escape higher taxes. Wealth goes where it’s treated best.

But as the study states: “It would not be credible to argue that no one ever moves to a new state because of the desire to live someplace where taxes are lower. But neither is it credible to say that taxes are a primary motivation, nor that migration has a large impact on the revenue impact of tax measures.”

The rich move because of high taxes is a meme started by conservative extremists as yet another factless argument against raising taxes to an appropriate level to support the basic services and infrastructure we use and need.

"Oliver Wendell Holmes once said: 'I like to pay taxes. With them I buy civilization.'"