Thursday, February 21, 2013

James Steward in the NYT Exposes Another Right Wing Myth – that High Tax Jurisdictions Result in Mass Migration of Millionaires

Facts and Data – The Enemy of Conservatives – Show It Just Ain’t True

Conservatives get very excited when  a state or country passes higher taxes and immediately publicity abounds that the wealthy people in that area are packing up and moving. 

It’s an article of faith among low-tax advocates that income tax increases aimed at the rich simply drive them away. As Stuart Varney put it on Fox News: “Look at what happened in Britain. They raised the top tax rate to 50 percent, and two-thirds of the millionaires disappeared in the next tax year. Same things are happening in France. People are leaving where the top tax rate is 75 percent. Same thing happened in Maryland a few years ago. New millionaire’s tax, the millionaires disappeared. You’ve got exactly the same thing in California.”

But financial writer James Stewart of the New York Times looked at some studies, and the conclusion is that the migration is just an urban myth.  For example, in Maryland

Maryland created a millionaire tax bracket in 2008 with a top rate of 6.25 percent. But a year later, the state reported that the number of millionaires filing returns had dropped by a third, and that total tax revenue from the group fell despite the rate increase. After a chorus of media criticism — “Millionaires flee Maryland taxes“ (The Washington Examiner) and “Millionaires Go Missing“ (The Wall Street Journal) — the state legislature let the increase expire in 2011.

But a study by the Institute on Taxation and Economic Policy, a nonprofit research group in Washington, found that nearly all the decline in millionaires was the result of a drop in incomes largely attributable to the stock market plunge and recession, and not to migration — “down and not out,” as the study put it.

Darn.  Is there more evidence of the fallacy of the Conservatives’ position?  You betcha.

Cristobal Young, an assistant professor of sociology at Stanford, studied the effects of recent tax increases in New Jersey and California. “It’s very clear that, over all, modest changes in top tax rates do not affect millionaire migration,” he told me this week. “Neither tax increases nor tax cuts on the rich have affected their migration rates.”

The notion of tax flight “is almost entirely bogus — it’s a myth,” said Jon Shure, director of state fiscal studies at the Center on Budget and Policy Priorities, a nonprofit research group in Washington. “The anecdotal coverage makes it seem like people are leaving in droves because of high taxes. They’re not. There are a lot of low-tax states, and you don’t see millionaires flocking there.”

This is not to say that no movement happens because of taxes, sure it does.  But consider this.

Professor Young said his study looked at every millionaire tax record filed in California over the last 20 years, and “neither tax increases nor tax cuts on the rich have affected their migration rates.” He said that the two major tax overhauls before the recent increase didn’t have any effect on migration rates of millionaires. “Among the very richest, people making more than $2 million, out-migration actually declined slightly after the 2005 millionaire tax,” he said.

Will any of this information change the minds of the virulently anti-tax crowd.  No.  Data and information is not something they base their opinions on, not when they can get their opinions conjured up out of thin air.

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