To better understand elite migration across state lines, I analysed tax return data from every million-dollar income-earner in the United States. The dataset includes 3.7 million top-earning individuals, who collectively filed more than 45 million tax returns over more than a dozen years – showing where millionaires live and where they move to.
And it turns out that place still matters for the rich – much more so than we might think.
Only about 2.4% of US-based millionaires change their state of residence in a given year. Interstate migration is actually more common among the US middle class, and almost twice as common among its poorest residents, who have an annual interstate migration rate of 4.5%.
This is, of course, what we could expect. It’s easy to move when you have very little, or when you’re young. It gets harder the older you get. And incidentally, as he finds, when people do move then it’s to the sun, and not for low tax. Again, there’s nothing new in that.
But what does that mean? It means we can tax wealth because the rich stay put.
And we can have progressive taxation.
The arguments over: the facts are what matters. Now let’s get on with it.
The Senior Lecturer needs to add one more thing. If you itemise your tax return, something you’d expect high earners to be doing, then your state and local tax bills are deductible from your federal one. Meaning that tax rates don’t vary all that much even across the different taxing jurisdictions in the US. It looks like this might get killed in the current tax bill:
Will the Republican tax bill devastate America’s bluest states? That’s the impression you’d get from two recent op-eds in the New York Times, the first by a pair of liberal academics, and the second by a conservative policy analyst, both of which castigate Republicans for drastically shrinking the state and local tax deduction, also known as SALT. Ray Dalio, the legendary hedge fund investor, argues that curbing SALT will cause more millionaires and billionaires to flee high-tax states for low-tax states, thus causing a severe revenue crunch in the former.
Hmm, maybe taxes do make people move?