tax_wealth_1

Tax hikes don’t send millionaires packing

STANFORD / PRINCETON (US) — The idea that millionaires will flee states that raise taxes on high earners is a myth, say experts.

A study by Stanford and Princeton researchers shows no evidence of millionaire migration in response to tax rate changes. For California millionaires, personal connections seem to weigh more heavily than tax rates in deciding where to live, the researchers report.

Embroiled in the California debate over Proposition 30′s progressive income tax proposals, some politicians have argued that raising taxes on the highest earners will drive them to states with lower tax rates, taking businesses and jobs with them.

Stanford’s Cristobal Young, an assistant professor of sociology, and Princeton’s Charles Varner, a doctoral candidate in sociology, conducted the study at the request of the California Board of Equalization, allowing them unique access to California Franchise Tax Board income data.

The mountain of data included information from all state income tax records for California from 1992 to 2009. The result of all that data crunching? The migration of millionaires in and out of the state has almost no relationship to tax increases or tax cuts.

Young says that having access to such comprehensive data allowed him and Varner to contribute compelling evidence to the income tax debate.

“I think it’s important that we can bring really high quality data to these kinds of issues,” Young notes.

The immense dataset, though a goldmine, also represented a challenge for the researchers, who pored over more than 300 million data points.

“It was an entirely different technical world,” adds Young. “You have to be extremely careful with this kind of data. Everything gets triple checked and code reviewed.”

The findings are consistent with the results of a study the team led in New Jersey last year.

The reason the number of California millionaires varies from year to year has almost nothing to do with taxes, the researchers found. Instead, the numbers change as incomes fluctuate, most likely because investments are sensitive to market cycles.

Varner and Young looked at millionaire migration after California’s 2005 Mental Health Services Tax was enacted, as well as after state tax cuts in 1996.

They found that millionaires did not flee as a result of the tax increase (in fact, more millionaires moved into the state than out during that period), nor did millionaires from elsewhere move to California as a result of the tax cuts.

Staying connected

What could account for the fluctuations in California’s millionaire population? According to the study, it’s not due to tax changes or rich people leaving the state. Almost all of the fluctuation comes from income dynamics at the top, with taxpayers falling into and out of the millionaire income bracket as their income rises and falls across the million-dollar mark from year to year.

The temporary nature of such high earnings may help explain why the additional taxes in the study didn’t cause a noticeable flight of millionaires.

Personal connections seem to weigh more heavily than tax rates in deciding where to take up residence.

“People are tied to states for different reasons,” Young says. “They don’t want to take their kids out of school, they want to stay connected with friends, with families . . . with business contacts.”

People crowd together, from Silicon Valley to New York City, because of the returns associated with collaboration, he says.

The study’s findings seem to dispel the “market metaphor,” in which states advertise their low tax rates in a competition to woo high-income individuals.

“This is a poor representation of how people decide where to live,” Young adds.

Young says that looking at the tax flight issue only scratches the surface of state financial woes.

“People need to think about the depth of California’s budget problems,” he says. “I think there’s much, much bigger things to worry about than this issue of tax flight because it’s really hard to find any evidence of it.”

The researchers hope to perform similar analyses in Maryland, Oregon, and Washington—eventually comparing trends across states.

“I hope people hear, listen to, and absorb what the evidence says on this issue,” Young adds.

Source: Stanford University

chat3 Comments

You are free to share this article under the Creative Commons Attribution-NoDerivs 3.0 Unported license.

3 Comments

  1. Victor

    Good article! It was very good, select material is very close to the life, the life around, launched a very fine narrative. Topics also very clear, very friendly, can let the reader with the attitude of the care to read such a good article.

  2. Marlena Heidenreich

    LOL – The real “millionaires” fled in the mid to late 90s, leaving the “national” “elite” so-called 1% (national fraction) to battle it out (with globalist financial predators, in national skins) in the periods after WW4 when real financial implosions ripple through the system puts the consolidation steroids into action;

    Meaning the “millionaires” left behind (slow adaptation to real financial globalist “ecology”), will be the new “middle class” and a few, very few will be lifted into the globalist tiers of financial “life”; The facade was “safe” national investment that actually daisy chained to globalist intake tentacles;

    Many “millionaires” will join the destitute from one week to the next, etc, as they attempt to “paper trail” legalized fraud algorithms after the fact, that went through several national tiers, corporations and “investment channels” into globalist tiers of world governmental financial reality;

    From the coming 2014-2015 probable world event node, the world war scenario can develop anytime after the next notable terror, massive financial or military world event to grease the pre-engineered national tracks to WW4;

    WW4 may take a whole ten years to manifest fully; Then again, it may proceed rather quickly;

    In any event, a massive war (or war series) will create a smokescreen of plausible deniability (worldwide) while overloading and exponentiating the globalist scale fraud engine (worldwide) beyond any hope of national financial recovery for unprepared “globalist dumb” national wealth holders, since no legal apparatus will be capable of providing the necessary “enforcement” of national laws in x1000 out of x1 kinds of lopsided ratios;

    Religious and other weaker group/org/class anachronisms will be the capital infusion that will recover the nations as that WW4 peters out as per the script to present the final version of globalist world government, and a “new world financial” salvation based on this new national credit profile – minus any national sovereignty or national actual ownership of the nation and it’s assets and properties;

    Hate to spoil the surprise, but that’s pretty much the formula, but it takes a number of years to unfold;

  3. Dave Francis

    MULTIPLE LIES COMING FROM THE DEMOCRATIC MAJORITY ASSEMBLY IN THE SANCTUARY STATE.

    Stephen Frank Stated on 11/14/2012 on California deficits as follows at http://capoliticalnews.com/

    In the past two months, the cash deficit of the State has gone from $22.3 billion to $24.7 billion—just for the first four months of the year.
    Plus the State OWES $12.5 billion to K-12 education

    It owes $15 billion stolen from Trust Funds to cover cash deficit

    It owes $10 billion BORROWED to cover the rest of the cash deficit. The State owes the Feds $10 billion for the loan to the unemployment insurance fund—so California can continue to send out unemployment checks.

    That is a total of $71.5 billion—and there is more. Yet, the State claims “California faces a $1.9 billion deficit through June 2014, significantly smaller than in recent years after voters passed two tax initiatives last week, the nonpartisan Legislative Analyst’s Office said last Wednesday”
    They claim we will have this small deficit, instead of $71 billion because of the $9 billion Prop. 30 is going to bring in, in new revenues! Any wonder our kids are illiterate—this is the math taught in our schools. Government lies—and tries to make you feel good about being insolvent.
    Seems like marijuana must be legal in government offices, he has studied.

    HOW MANY LEGISLATORS ARE BRAZENLY LYING ABOUT THE TRUE DEFICIT IN THE 50 STATES?

    California has the highest population of illegal aliens who have settled there. Thousands of children of illegal alien parents gaining automatic citizenship and the cost is thrown at the taxpayers. Health care and other free handouts that are the right of citizens is being disbursed to anybody who sneaks across the border or steps off a plane. None of the 50 states is exempt from this silent attack on our country or the pilfering of their general treasuries. Now the Democrats have their majority public entitlements will be pouring out across the state to all the “Freeloader voters” the spongers and the people who have no intention of finding a job. A large proportion who pay no taxes at all, the parasitic people who are a great windfall for the Democrats and Liberals, who believe we owe them a living?

    Obviously there is an exception to this rule, whereas there are special needs people, the sick and handicapped in some form or other. There are the homeless veterans and plenty other others, but we have become an public assistance nation, but some of the 49 percent that Mitt Romney talked about have scrounged their way through life and allowed the taxpayers to carry them. A great number have figured a way to deceive the welfare system, which is a stain on the real workers. Because the system could easily be thwarted, with stolen ID, the elderly and the sick lose their major assistance to the scroungers. When we cannot truly look after our troops returning from the warzones and still have millions of homeless without hope, then why are we either bringing in millions of legal immigrants, other than highly skilled workers that are always welcome?

    Why is not illegal entry a Felony? CAN ANYBODY ANSWER THAT QUESTION?

    IS CALIFORNIA TAXPAYERS COMMITTED TO SUBSIDIZE ILLEGAL IMMIGRANTS FOREVER?

    BEFORE ANY PASSAGE OF IMMIGRATION REFORM FINDS ITS WAY THROUGH THE CONGRESS, TWO BILLS ARE A NECESSITY TO EVENTUALLY STOP THE INGRESS OF ANY MORE FLOWS OF ILLEGAL IMMIGRANTS. 1. THE LEGAL WORKFORCE ACT CONTAINING MANDATORY E-VERIFY AND HALT ILLEGAL ALIENS TAKING JOBS AND HOLDING EMPLOYERS ACCOUNTABLE. 2. A SIMPLE AMENDMENT TO END THE BIRTHRIGHT CITIZENSHIP BILL TO STEM THE INFLOW OF SMUGGLED BABIES EITHER UNBORN OR AS AN INFANT, INTO THE UNITED STATES TO GAIN INTENTIONAL RIGHTS TO BE A CITIZEN AND A MASSIVE FINANCIAL BURDENING THE U.S. TAXPAYER. 3. THE REINTRODUCTION OF FORMER PRESIDENT BUSH 2006 SECURE FENCE ACT IN ITS ENTIRETY. THIS IS A DOUBLE PARALLEL FENCE STRETCHING ALONG THE BORDER OF THE U.S STATES AND ITS SOUTHERN NEIGHBOR. AMERICA MUST REDUCE SANCTUARY CITIES, CHAIN MIGRATION AND THE ILLEGAL ALIEN INVASION. 4. A GOVERNMENT ISSUED PICTURE ID CARD, WHICH CONTAINS INFORMATION TO USE IN PROVING WHO YOU ARE?

We respect your privacy.