California is looking to increase its taxes on the richest in that state. And as a result all the usual mischief about the rich heading for the door has been widely heard.
So, the Silicon Valley Mercury News did an investigation aided by the Institute on Taxation and Economic Policy, a nonpartisan research group based in Washington D.C. And they found this:
As the more detailed report notes:
An analysis by this newspaper of IRS tax-return data shows that states that charge high income taxes -- from California to New York to New Jersey -- are home to the highest number of rich people per capita. And two-thirds of the states that don't charge any income taxes actually have fewer numbers of millionaire residents per capita, the analysis shows.
Consider Florida and Texas, which are often cited as havens for rich movie stars, CEOs and athletes because they are income-tax free. California, on the other hand, has the nation's second-highest income tax rate.
So in those three states, how many people earn at least $1 million a year for every 100,000 taxpayers?
Florida: 202. Texas: 217. California: 252.
It's fairly easy to move in the US. But people don't.
Shall me lay that myth to rest then?
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That doesn’t really prove anything. There are lots of millionaires (net assets > £600k) around New York because they work in finance, trading and insurance. But when they retire they may well be inclined to move, not just for tax reasons but it is a factor. A lot of them move to Florida where the tax rate is 0%.
That’s absurd!
That says people in jobs don’t move
The vast majority earning $1 million are in jobs
And no, they don’t move
Which is what the article said
It says that people who work in financial centres don’t move, but other people who have other types of jobs that don’t require them to be in a particular place can and do move. A typical example would be a software programmer which is generally a transferable skill. Programmers can and do move when they are hit with higher costs, including taxes.
They are not millionaires
They are also a small part of the working population
Why not answer the article I wrote – not one you’d like to ave read?
Hi Richard,
Maybe people think a 10% rate extra is worth it in CA for the lifestyle or opportunities, maybe the story is different in say the UK. I don’t know many places in the world where tax rates flap around by so may %age points. CGT in particular goes from 40%, to 10% (with taper relief) to 18% to 28%. Income tax bands and rates flap up and down (10% rates, 50% rates). Maybe some stability and small changes would be better.
Haven’t you noticed London is the coolest place in the world?
Time to open your eyes just a little wider I think
….And California is considerably warmer, with a fraction the taxes!
Usually you argue that the rich don’t pay tax and now you are pointing to evidence that the rich don’t move when tax rates are high. It can only be one or the other.
London the coolest place in the world? you must be joking, it is only cool if you are a Middle Eastern or Russian tax exile buying a new passport. For 99% of the people that live and work there, it is a pretty poor way of life.
Oh please don’t be silly: in large populations both can happen
The point of this research is to show that people stay despite high taxes
But some will go
Please do not be so black and white – or dare I say it, naively simplistic?
As for London – the perspective that counts here is that of the millionaire. Of course the other view is right too – but they ignore it. Again, why the blinkers?
If people don’t move for tax reasons…………. then why do you suggest we need a passport tax?
Or have you abandoned that idea in light of this new evidence?
Not at all
One has to allow for all possibilities
This is not a black and white world
Only neoliberals seem to think it is
Got it.
So “the rich heading for the door” is “a myth”
But you want to cater for it with a passport tax.
It’s admittedly an ingenious strategy.
Both happen…
Get real
How Zen.
If a myth happens, is it still a myth?
Richard, is it possible that these people aren’t moving from places like California because they are avoiding tax, i.e. they’re using loop holes like trusts, nevada companies, etc, etc.? Hence they get to keep a great lifestyle, e.g. California, without paying the high tax. Maybe I missed something, but the article seemed to be focused on people staying put..but are they actually paying tax in those states?
Possible…of course
But it does look at the actual income they declare – so they’re not good tax avoiders if that’s true
The article is a little strange in its presentation. It talks about “the wealthy” but then uses “income” as its statistical measure. Many millionaires won’t have an income anywhere near $1 million per year so most millionaires simply won’t be in the figures. All the figures really show is that there are a lot more high earners in New York (probably thanks to Wall Street) and in California (the home of many high-tech businesses). This isn’t really surprising.
What is surprising is that Florida has so many people with incomes over a million dollars per year because there is no obvious industry that would result in that. The last time I looked tourism isn’t a great source of individuals with an income of a million dollars per year or more. It is noticeable that the data provided suggests that the percentage of people with incomes of over a million dollars falls as the income tax rate increases.
Oh dear…..
This is pedantry ….. and so like all your comments I suspect I will not waste time with them again
there is of course a strong correlation between high income and wealth
And you ignore the premise of the article
What it shows is that high tax states do not repel high earners
Why not address that fact?
Indeed, it could be easily argued high tax encourages high