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