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Rich Don’t Run To Lower Tax States When Their Taxes Are Raised

Rich Don’t Run To Lower Tax States When Their Taxes Are Raised

Here in Minnesota, despite a Republican sweep that gave both the House and the Senate majority GOP control for the first time in decades, we still elected a Democratic governor.  One of the reasons he won?  He stated that he would balance the state budget by raising taxes on the rich.

Although Governor Dayton was elected on that promise, the Republicans have been fighting him tooth and nail on implementing it.  Raising taxes on the rich, they claim, would simply make them all move to a different state.

It’s a favorite talking point of the GOP, regardless of which state they are in.  And, it turns out, it’s just not true.

Ezra Klein explains:

A few years ago, New Jersey instituted a tax that raised rates on those making more than $500,000. Predictably enough, some clever academics swooped in to test the prediction that all the rich folks would leave. So how’d it fare? Poorly:

The study found that the overall population of millionaires increased during the tax period. Some millionaires moved out, of course. But they were more than offset by the creation of new millionaires.

The study dug deeper to figure out whether the millionaires who were moving out did so because of the tax. As a control group, they used New Jersey residents who earned $200,000 to $500,000 — in other words, high-earners who weren’t subject to the tax. They found that the rate of out-migration among millionaires was in line with and rate of out-migration of submillionaires.  The tax rate, they concluded, had no measurable impact.

Except for some who have retired, rich people just don’t move because their taxes have increased, Klein concludes.  After all, there’s more to living in a place than how much a person pays in taxes — there is family, community, their jobs, housing and other aspects of their lives that they don’t just upend over willy nilly.  Good decisions are based on whether the financial losses are compensated for by moving costs, losses that could occur by selling houses, finding new work that pays the same amount and doesn’t lose benefits. 

One way people become rich is by making smart economic decisions.  Evaluating quality of life simply on the amount of taxes one is paying is not one of them.

 

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Photo: http://www.gnu.org/copyleft/fdl.html via Wikimedia Commons

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10:06AM PDT on Apr 25, 2012

Gee, common sense again. How did that happen? I thought we just lived in crazy-land. BTW, the Japanese CEOs earn peanuts compared to our high-rollers, yet they continue to live in their country. Our compensation to CEOs is way off the map compared to other developed nations, and yes, they would work for less. They like the power at least as much as they like the money.

6:54AM PDT on Apr 28, 2011

John Hall, Obviously you totally missed the point of the article and used this venue to 'Sound Off' against Obama. Remember, he is President but can't just change legislated tax rates with one sweep. He does not have total control. He is only one vote along with the one vote of each of his Democrates while the Repubs do there thing against him in every sitting and every attempted passing of Tax Legislation. He does not have the power to overturn Legislation or Tax Legislation. He is the elected President and the leader but the Legislative-Democratic-Process still runs the country when it comes to governing and governments still must abide by the Rule of Law and not by 'Presidential Decree.' It's not an autocracy or a dictatorship. It's supposed to be a Democracy but with such strong Corporate Lobby powers and $$$$ prevailing on the voting House and Senate, how does Democracy and Justice for All ever manage to emerge and see the light of day. Ignorance prevails in the streets and avenues of the Nation and Corruption prevails in the Halls of Government. We can only try and continue trying to educate, improve, ameliorate, revise, and trojan-on with hope for better times. Fairness and Justice are fairly simple equations but can be 'spin-doctored' endlessly and the voting public continues to gobble it up. Shame on them, Shame on us.

7:12AM PDT on Apr 27, 2011

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President Barack Obama is a hypocrite. He is not willing to practice what he preaches when it comes to taxes. And in so doing, he is exposing the lack of importance his own agenda really carries — even in his own household.

In the 2008 campaign, then-Senator Obama repeatedly scoffed at the tax rates for the majority of the small business class of our country. He repeatedly chided those in the tax bracket that included the highest number of small business owners. He declared that these folks would need to do “more” and suggested that everybody should, “do their share.”

He also promised that if he were elected president he would increase tax rates for those making over $250,000 per year, that he would force those in that tax bracket to do more, and that it would be the true measure of patriotism for this group of Americans to pay more in taxes.

He spoke in glowing terms about returning the tax rates in his administration to the levels of the Clinton-era, and challenged those earning above $250,000 a year to embrace their responsibility to pay 39% in federal income taxes (not the rate at the time, which was then 35% under President George W. Bush.)

And then we saw his tax return.

In 2010 the Obama household–after every loophole, donation, and tax exempt charitable donation had been deducted –recorded earnings of $1,700,000 and change. To repeat, this wasn’t gross earnings, this was adjusted earnings. This is the amou

8:22PM PDT on Apr 26, 2011

Veronica C - Clearly you missed the point or didn't read the article. It states that those who left for whatever reason were replaced by others and the rate of loss was basically the same as for those who did not get the tax increase. Understand?

8:07PM PDT on Apr 26, 2011

Some will move their businesses. Some are considering it in IL since the taxes have been raised. Just because they can afford it doesn't mean that's how they want to spend their money. Some would actually prefer to create jobs and those who feel strongly enough will relocate, maybe just over the state line, to do that.

7:11PM PDT on Apr 26, 2011

David C.
let me say i meant working people who file taxes .

10:58AM PDT on Apr 26, 2011

High Fives Davd C and Suzan T

10:33AM PDT on Apr 26, 2011

Let me remind people of a few points that have already been raised here but bear repeating.

Poor people don't pay income tax. Correct. However, poor people pay sales tax, gas tax, often indirectly property tax through their rent, and "sin" taxes (alcohol and cigarettes). These taxes amount to a disproportionate amount of their income. The working poor pay payroll tax as well.

Also - if having a super low tax rate for companies is so beneficial for a country, attracting so much business for them and making their economy great, why is Ireland way worse off than the U.S. and most of the European union? (Ireland has a very low corporate tax rate). Could it be that there really ISN'T any benefit to the country, and in fact harms the country because the corporations use resources but don't pay taxes in an amount that covers the costs?

Taking the logic to an extreme that a lower tax rate for wealthy individuals is extremely important for drawing wealthy individuals to live in a area, we should start paying wealthy people to live in our cities/towns

8:51AM PDT on Apr 26, 2011

Tax cheats.....American sewage

8:37AM PDT on Apr 26, 2011

John Hall "... 47% of americans dont pay federal taxes to me thats not fair."

Sorry John but the last time I heard "it's not fair" is when my kids were about 4. This prompted my spoiled brat thought.

The lowest income group pays sales, gas tax, property tax directly or indirectly. For you, fairness requires paying income tax when you make $6,000 per year. You ever heard of Scrooge?

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