Click here to check the ultimate guide to learn how to leverage your PC and internet to make money online.
The Washington Independent
The Washington Independent

Studies debunk myth that the rich flee states with higher tax rates

Fiscal conservatives have long cited anecdotal and inconclusive evidence that state tax hikes send the rich running to states whose tax policies are more

Elisa Mueller
News
Last updated: Jul 31, 2020 | May 02, 2011

Fiscal conservatives have long cited anecdotal and inconclusive evidence that state tax hikes send the rich running to states whose tax policies are more sympathetic to their pocketbooks. Two new academic studies, however, poke holes in such theories.

NPR’s Robert Smith reports on research from Jeffrey Thompson, an assistant research professor at the University of Masachusetts-Amhert’s Political Economy Research Institute, and Cristobal Young and Charles Varner, sociologists at Stanford and Princeton Universities.

Thompson’s study (PDF), published in April, is a statistical analysis of migration trends in New England, as compared to state tax rates in the region. Thompson concludes that while high tax rates may make a given state less appealing for people already planning a move, there is little to no evidence that people leave states when taxes go up. He writes:

The vast majority of households that move to a different county or state indicate employment, family, and housing-related matters are the main reason behind their move.

The limited available research on the impact of taxes on cross-state migration suggests that taxes do not play a very important role.

Thompson writes further that on an individual level, those with higher incomes tend to have stronger financial and community ties to where they live, discouraging interstate emigration. Back on the statewide level, the decrease in migration to a high-tax state is actually vastly offset by increased revenue from high taxes, resulting in net benefits to the state economy and job market:

States raising taxes will see somewhat fewer migrants choose their state as a destination, but offset and reverse this impact when they use increased tax revenues in ways that attract people and create jobs. Because the migration impacts of unemployment are so much greater than for taxes, when states use additional revenue to create jobs and lower unemployment, the net effect is to decrease out- migration and attract more people to the state.

Young and Varner’s study (PDF), set to be published in next month’s edition of the National Tax Journal, examines the consequences of New Jersey’s so-called “millionaire tax,” a 2004 tax increase of 2.6 percent on any New Jerseyite making more than $500,000 a year. Young and Varner found that not only did those hit with the tax not leave in any significant numbers, but that earners making just below the $500,000 cutoff left at about the same rate, suggesting that even among top earners who’ve moved from New Jersey since 2004, taxes have had very little impact on their decisions to do so.

The paper bolsters evidence from a 2009 study in which Princeton demographer Douglas Massey showed that, at most, 0.7 percent of those affected by the “millionaire tax” had left the state for tax reasons since 2004. While their departure cost New Jersey $38 million in annual revenue, the money collected from the remaining 99.3 percent has added nearly a billion dollars a year to New Jersey’s coffers. The net economic gain from instituting the tax has been an average of $857 million a year.

Elisa Mueller | Elisa Mueller was born in Kansas City, Missouri, to a mother who taught reading and a father who taught film. As a result, she spent an excessive amount of her childhood reading books and watching movies. She went to the University of Kansas for college, where she earned bachelor's degrees in English and journalism. She moved to New York City and worked for Entertainment Weekly magazine for ten years, visiting film sets all over the world.

Related

Rep. Paul Ryan to deliver SOTU response

Chairman of the House Budget Committee Rep. Paul Ryan (R-Wis.) will deliver the Republican response to the State of the Union Tuesday, according to Mike Allen

Rep. Paulsen allies with medical device industry to relax FDA oversight

Source: Flickr; Republicanconference (www.flickr.com/photos/republicanconference) On the heels of the Minnesota Independent story last week about U.S. Rep. Erik Paulsen’s cozy financial relationship with the medical device industry, the New York Times reported Tuesday that some health professionals are alarmed by Paulsen’s push to relax Food and Drug Administration (FDA) oversight

Rep. Paulsen touts balanced budget constitutional amendment

In a post for the conservative blog True North , U.S. Rep

Rep. Patrick McHenry: Please, Conservatives, Fill Out Your Census Forms!

The conservative congressman from North Carolina, a constant critic of the census -- one of the people who sounded the alarm about politicization when the

Rep. Paulsen, Karl Rove the latest to get ‘glittered’

Rep. Erik Paulsen and former Bush staffer Karl Rove were both showered with glitter at the Midwest Leadership Conference Friday

Rep. Perlmutter to hold constituent meet-up in grocery store

Colorado Congressman Ed Perlmutter will hold a Government in the Grocery constituent meet-up this evening from 5-7 at the Safeway at 38th and Wadsworth in Wheat Ridge. The address is 3900 Wadsworth. The meeting, where Perlmutter typically sits at a folding table and talks to whomever shows up, is free and open to the public

Rep. Perlmutter criticizes House measure that would eliminate 800K federal jobs

Congressman Ed Perlmutter today issued a scathing statement criticizing the House of Representatives for passing a spending bill that could put nearly a million federal employees out of work. The Colorado delegation voted strictly on party lines, with all four Republicans voting in favor of the bill and the three Democrats voting in opposition. Perlmutter’s statement: “My number one priority is to get people back to work because that’s the best thing we can do to pay our debt and move forward toward economic stability

Rep. Pete Stark Won’t Dignify Constituent by, er, Micturating Upon His Leg

In the tradition of Rep. Barney Frank (D-Mass.), California Democratic Rep. Pete Stark revealed at a recent town hall gathering that there are limits to what

Rep. Peace, ACLU seek investigation of soldier’s allegations of racial discrimination in Afghanistan

Both Rep. Steve Pearce (R-NM) and the American Civil Liberties Union agree: There needs to be an investigation into Spc.

© Copyright 2021 The Washington Independent All Rights Reserved

Terms & Privacy | twi.news@washingtonindependent.com

Click here to check the ultimate guide to learn how to leverage your PC and internet to make money online.