As Tax Day approaches, it’s a good time to examine some myths about how people – and the wealthy in particular – respond to higher taxes.
As we all know, tax rates differ from state to state, in some cases dramatically. According to a report released last week, residents in New York, Hawaii, Maine, Vermont, Connecticut, New Jersey, and Maryland have the highest tax burdens in the country. On the other hand, residents in Alaska, Delaware, New Hampshire, Tennessee, Florida, Wyoming, and South Dakota have the lowest.
You’ve probably heard a lot about how rich people will move from high-tax states like New York to low-tax states like Florida to avoid paying taxes. Well as it happens, most of the 200+ members of the Patriotic Millionaires actually live in some of the highest-taxed states.
This may come as a bit of a surprise to some. Why, after all, would we choose to live somewhere where we knowingly pay more in taxes?
The answer is simple. We live in those states because paying higher taxes as wealthy people makes these states the kind of places we want to live.
(One of our members, David Nixon, recently made this argument in an opinion piece published in Fortune Magazine. If you’re interested, you can read the piece HERE.)
States with higher taxes do better across the board than their low-tax counterparts on a variety of metrics. They have some of the lowest crime and incarceration rates in the country. They have better public schools and witness better educational outcomes among their students. They have higher quality, more accessible, and more affordable healthcare systems. They have cleaner environments, with less air pollution and safer drinking water. They also have healthier economies, with lower poverty rates, lower rates of unemployment, and faster levels of income growth.
This is not an accident. High-tax states do better because they raise more revenue from rich people like us, which they then use to create healthier, more prosperous, and safer communities. It’s the same reason why high-tax Scandinavian countries like Sweden, Iceland, Denmark, Norway, and Finland consistently rank among the world’s happiest and healthiest: they have very progressive tax systems which they use to fund social programs that promote health and prosperity among their citizenry.
Politicians frequently complain that progressive taxes aren’t viable because they encourage rich people to flee to low-tax states. You may recall, in a 2010 speech to the New Jersey state legislature, then-governor Chris Christie famously quipped, “Ladies and gentlemen, if you tax them, they will leave.” Public threats to move from wealthy people themselves – especially high-profile billionaires like Ken Griffin, Jeffrey Gundlach, and (most recently) Ken Fisher – certainly add fuel to this idea of millionaire tax flight.
Yet research has shown that the phenomenon of millionaire tax flight is nothing but a myth. After analyzing thirteen years of millionaire migration patterns for his 2017 book, The Myth of Millionaire Tax Flight, Cornell University Professor Cristobal Young found that just 0.3 percent of millionaires move to low-tax states in a given year. Furthermore, it appears that the pandemic and shift to remote work didn’t change this pattern much. In more recent research, Professor Young and Ithai Lurie from the Treasury Department found that high-tax states lost just 0.5 percent of their millionaires during the pandemic.
Wealthy people choose to move for all sorts of reasons, but at the end of the day, it simply isn’t plausible to say that they move for tax reasons. Millionaires like us are so wealthy that we won’t even notice, at least not in any meaningful way, paying an extra percent or two of our incomes on Tax Day. Despite what naysayers like Ken Griffin or Ken Fisher would have you believe, taxes really are a small consideration, one of many factors to consider, when the rich decide where to live. Instead, what is much more important to us is the quality of life improvements – better schools, cleaner air and water, better hospitals, safer neighborhoods – that higher taxes provide.
With Tax Day fast approaching, policymakers should stop trying to appeal to anti-tax millionaires crying wolf, and instead recommit themselves to taxing the rich. They should not worry that millionaires will pack their bags for low-tax havens if they implement more progressive taxes, as all evidence points to the contrary. Instead, what should concern them is the health and well-being of their constituents. Millionaires like us are more than happy to pay the price to make our communities thrive. If raising taxes on the rich means improving schools, parks, hospitals, roads, and more, then everyone, including the rich, will be better off.