Reconsidering Millionaire Tax Flight

Cristobal Young, a sociology professor at Stanford, says tax and migration data show millionaire tax flight is a myth. He argues that rich people are tied to their communities, that the truly mobile people are the young who want better schools, social programs, and amenities, and that state and local governments should tax the rich more to pay for nice things. You can get a quick version of his case in a recent podcast.

Over 13 years, 2.4 percent of Young’s millionaire population moved each year, a smaller percentage than among the poor or the general population. Of those millionaires, 15 percent moved to lower tax states including Florida, which Young says is a special case and not an indicator of the value of low taxes. You can grant these statistics without accepting his conclusion, which comes up every few years.

People are inclined to stay where they are for a number of reasons—family, work, community, weather, etc—and those ties are stronger for the older and more successful. There are also a number of ways people can shield their income from taxes without moving. Given all of this, the surprising thing may be, not (as Young claims) that so few high-income earners move to low tax states, but (as the conventional wisdom claims) that so many do.

It is clearly a choice to have higher tax rates or lower tax rates, but it is worth noting that when North Carolina put together its (ultimately unsuccessful) $1.6 billion  incentive package for Toyota, a third of the value came from lower taxes every individual and business in North Carolina receives just by being here compared to the other states.

Joseph Coletti / Senior Fellow

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...

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