Friday, May 27, 2016

Are the Rich REALLY as Mobile as Thought?

The view that the rich are highly mobile has gained much political traction in recent years and has become a central argument in debates about whether there should be "millionaire taxes" on top-income earners. But a new study dispels the common myth about the propensity of millionaires in the United States to move from high to low tax states.

"The most striking finding in our study is how little elites seem willing to move to exploit tax advantages across state lines," said Cristobal Young, an assistant professor of sociology at Stanford University and the lead author of the study. "Millionaire tax flight is occurring, but only at the margins of significance."

In any given year, Young and his fellow researchers found that roughly 500,000 individuals file tax returns reporting incomes of $1 million or more (constant 2005 dollars). From this population, only about 12,000 millionaires change their state each year. The annual millionaire migration rate is 2.4 percent, which is lower than the migration rate of the general population (2.9 percent). The highest rates of migration are seen among low-income tax filers: migration is 4.5 percent among people who earn around $10,000 a year.

"There is a widely held perception that elites are extremely mobile -- that they are more attached to money than to place, and with money you can live anywhere you want," said Young, who noted that millionaires are no less likely to live in states with high income taxes (e.g., New Jersey or California) than in states with low or zero income taxes (e.g., Texas or Florida). "We tend to think of migration as a form of freedom and one of the privileges enjoyed by the rich. In practice, migration comes with high social and economic costs -- uprooting one's family, breaking away from one's social networks, and restarting in a new place."

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