Virtually every state in the country has a tax system that heavily favors the rich. Despite this fact, only a handful of states responded to the revenue slump brought on by the Great Recession with any sort of tax increase on this favored group. What gives? With so many states looking for ways to balance their budgets, why isn't there more interest in finally making the rich pay their fair share?
The answer lies partially in one of the most effective, yet most absurd anti-tax scare tactics to be used in recent memory: the so-called "millionaire migration" epidemic. State lawmakers across the country have heard again and again that wealthy taxpayers will pull up stakes and move in response to just about any progressive state tax increase. In most cases, however, even a cursory look at the facts shows that these fears are unjustified. With tax day nearly upon us once again, let's take just a moment to make those facts known.
In New York, it was a business-backed group called the Partnership for New York City that first began spreading misinformation about the state's income tax surcharge on the rich. In a February report, the Partnership claimed that
"New York's high taxes risk pushing jobs, tax revenue, and talent to neighboring states. ...Since the imposition of New York's surcharge in 2009, there has been a 9.4% decrease in the state's taxpayers who are worth $1 million or more, decreasing from 381,786 in 2007 to 345,892 in 2009."
That sounds pretty scary, but the same data used by the Partnership shows that every state in the country saw its millionaire population decline between 2007 and 2009, and that a whopping forty-three states experienced declines exceeding New York's 9.4 percent drop. Apologies for stating the obvious, but these declines were a predictable result of the recent recession.
Making matters worse, the original press release accompanying this data made very clear that the U.S. as a whole saw its millionaire population decline by nearly 14 percent between 2007 and 2009. It's therefore a little strange, to say the least, that the Partnership would interpret New York's 9.4 percent drop as providing any evidence whatsoever that could be useful in its crusade against taxing high-income earners.
Oregonians also had to listen to their share of uninformed anti-tax nonsense during the course of the last few months -- this time coming from pundits living clear on the other side of the country. In December of last year the Wall Street Journal's editorial board suggested that a recent voter-approved income tax increase on upper-income families caused up to 10,000 Oregonians to pack their bags and head to Texas. Their "evidence" in support of this claim? 10,000 fewer taxpayers were affected by the tax increase than the state originally expected.
Of course, there's at least one other perfectly reasonable explanation for why fewer Oregonians would be affected: the recession lowered their incomes enough to bring them beneath the starting point for the new tax brackets (only taxpayers earning more than $125,000 - or $250,000 in the case of married couples -- were affected by the tax increase). Unfortunately for the Journal, the data strongly suggest that this is the case.
After just a quick glance at the data, my group -- the Institute on Taxation and Economic Policy (ITEP) -- found that while the state's revenue estimators overestimated the size of Oregon's "rich" population by roughly 34,000, it also underestimated its middle- and low-income population by more than 60,000. Simply put, some 26,000 more Oregonians filed tax returns than the state originally expected. They just earned less income than usual due to the weak economic climate.
What makes this story especially troubling is that, as in New York, there was very clear evidence available refuting the Journal's claims -- had anyone there taken the time to look for it. Almost a full week before the Journal's piece was published, the Oregon House Revenue Committee held a hearing in conjunction with the release of the new data at issue. As is usually the case, that hearing gave the state's revenue estimators an opportunity to offer some very useful context, such as the fact that the 10,000 return discrepancy was due to taxpayers being "driven down the income distribution because [of lower than expected capital gains income], and they [moved] from the affected category to the unaffected categories."
No discussion of millionaire migration would be complete without a look back at the debacle in Maryland. Thanks in no small part to a pair of misleading editorials published by the Wall Street Journal, Maryland's legislature failed to approve legislation early last year that would have extended its temporary tax bracket on incomes over $1 million. Since then, much of the hubbub surrounding the Maryland "millionaires' tax" has died down, but the effect that the Journal's misinformation campaign had on shaping the conventional wisdom on "millionaire migration" makes the issue worth revisiting.
As in New York and Oregon, the question in Maryland revolved around whether high-income taxpayers were migrating or simply becoming less rich. When the Maryland Comptroller released data showing a roughly 30% drop in millionaire filers between 2007 and 2008 (the year Maryland's "millionaires' tax" first took effect), the Journal enthusiastically seized on this figure as proof that the "redistributionists" and "class warriors" had failed in their scheme to "soak the rich."
To its credit, the Journal did exercise a modicum of caution in its first two editorials by reminding its readers that much of this decline was due to the recession, though it continued to insist that the "millionaires' tax" just had to have something to do with this drop as well. ITEP responded to the Journal in multiple reports and an unpublished letter to the editor explaining that more detailed data, provided by the Comptroller's office upon request, indeed confirmed that the vast majority of "migrating" millionaires had simply moved to a lower tax bracket.
Fast forward to last December when the Journal revived the Maryland migration myth in the context of Oregon. This time, the Journal threw caution to the wind and stated flatly that "one-third of [Maryland's] millionaire households vanished from the tax rolls after [tax] rates went up." Of course, this flew in the face of its published claim from nine months earlier that: "one-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008." But that was back before the Journal forgot about the recession. (For the record: even the "one-in-eight" figure was an exaggeration.)
In all three of these states -- New York, Oregon, and Maryland -- the anti-tax crowd ignored a lot of fairly obvious evidence running counter to their claims. Unfortunately, that's the way it's been whenever the "millionaire migration" issue has made its way into statehouse debates. Any shred of "evidence," no matter how meaningless or out of context, has been seized upon by those seeking to construct the anti-tax, vote-with-your-feet narrative they desperately wish was true.
With so much bad information floating around, it's not surprising that most states have been reluctant to eliminate the massive preferences for the wealthy built into their tax systems. But what lawmakers need to know -- and what the Wall Street Journal and others have been refusing to tell them -- is that once you scratch the surface of the millionaire migration issue, it becomes abundantly clear that the anti-tax side's claims have no substance. It's long past time to stop letting the millionaire migration myth get in the way of progressive tax reform.
There comes a point when you have won the money game and you have enough.
and whatever they ARE doing is nowhere near meeting NEEDS.
Well, poor business titans can't work in Hostile countries, India and China are Bigger and better at everything and they have unlimited labor...Lets grab the public sector businesses of law enforcement, schools and fire protection. People don't agree? We told you we were going to "starve Government" and we never lied about the chaos that will begin to happen as soon as local govt dies...you better let us have it or else
Also we Need to get commercials onto NPR to reach that lucrative market! Imagine listening to classical music without commercials!!
Do they leave the state without selling there home? Of course not.
And who is it that's going to buy their house when they move? Some over paid teacher, fireman or policeman? I don't think so. Real estate amd a little common sense dictates that for every one that leaves another must fill his/her place. Tax them!
That may well be true; but it doesn't mean that there isn't a real longer term connection here. Teenage sunbathing may mean melanomas by age 50 - there is a connection; but it is long term and time consuming to substantiate. The US didn't cease to be industrially preeminent overnight - the factors that led to industrial migration took a long time to play out. Huge tax increases on the financial sector would be unlikely to create an immediate wholesale exodus; but by the time such an exodus became unmistakable, it might be very difficult to reverse. Who foresaw the exact moment of the tipping point for Detroit at the beginning of the migration of auto production?
The article you question has a lot of data on that the millionaire migration data doesn’t support the story, that millionaire migration is an invention of the not so very rich. Where are your data? I think this all has been cooked up to hit the Democrats over the head.
In the auto industry case you mention, economists and politicians noticed in the 1970s that Toyota and VW (among others) were systematically, building up a net of dealers, while the great three were gouging their dealers. There also were many articles that due to a National Health System Germany and Japan, US Automakers were paying $3000 more per car (in inflation adjusted money), That is the reason the US auto industry tanked, not some mysterious long-term effect.
There is also historical data in the US and elsewhere: we were doing just fine under Eisenhower with 75% (95%?) marginal tax rate for income over $4trillion. Let’s go back to 75% and pay back the debt. And then there is Clinton! Raise taxes = boom the economy
Actually blackmail.
Then, the millionaires would have to leave America completely if they want lower taxes elsewhere.
And if the federal government taxes them, they will be taxed in any state they live in.
Of course the rich have the money to buy the politicians and get them to keep taxes as low as possible.
Some people are greedy and selfish. They want to eat but not pay the bill.
We need somebody to stand up to the oligarchs.
Maybe sooner or later the workers will rebel.
All we can do is wait.
Until enough workers get tired of the abuse.
And leave the rest of us kn@bs here clawin' and scratchin' over each other...
Only public funding of campaigns will fix it.
Jack Lohman
http://MoneyedPoliticians.net