The claim that tax increases on the wealthy will cause them to leave the state is a standard argument that politicians of both parties trot out when proposed tax increases are on the table. Even Jerry Brown, contemplating a run for Governor of California, dusted off the argument recently.
The argument, on its face, doesn’t make much sense. Surely, there are reasons other than tax rates that explain why people prefer to live where they do.
The NY Times recently ran an article citing evidence debunking that myth.
Yet there is surprisingly little evidence to support the proposition that rich New Yorkers would bolt if forced to pay higher income taxes. Though tracking the movement of wealthy taxpayers from state to state is difficult, experts on public finance and migration say they have yet to document a substantial “rich drain” in states that have raised income taxes in recent years.
“At the level we’re talking about, there’s no quantitative evidence that it affects the mobility decisions of affluent taxpayers,” said Douglas S. Massey, a demographer at Princeton University and president of the American Academy of Political and Social Science.
The article cites evidence from California and New Jersey as well—in each case revenue from small tax increases on the wealth exceeded revenue lost from people chasing lower tax rates.
The hits to free-market fundamentalism just keep coming.
Tags: Jerry Brown, taxes, wealth flight
