Thursday, March 19, 2009


There's a fairly easy way to go Galt, at least on a statewide (or citywide) level -- in fact, it's so easy that many politicians simply assume that lots of people do it, and make policy decisions accordingly. But as it turns out, this is completely a myth:

It is perhaps the most potent argument offered by those who oppose increasing the income tax on wealthy New Yorkers: If you raise it, they will flee.

That case has been made repeatedly by Gov. David A. Paterson, who says that higher taxes should be a last resort....

Yet there is surprisingly little evidence to support the proposition that rich New Yorkers would bolt if forced to pay higher income taxes....

"At the level we're talking about, there's no quantitative evidence that it affects the mobility decisions of affluent taxpayers," said Douglas S. Massey, a demographer at Princeton University and president of the American Academy of Political and Social Science....

New Jersey raised taxes on the wealthy in 2004, increasing by 2.6 percent the tax rate levied on those making more than $500,000 a year; and Gov. Jon S. Corzine this month proposed a new increase on high earners.

But a study by Professor Massey and two colleagues, published in September, estimated that the previous tax increase cost New Jersey only 50 to 350 existing "half-millionaire" households -- a relatively small number against the total of 44,000 such households in the state.

While those departures cost the state about $38 million a year in revenue, the study estimates, the higher taxes levied on those who stayed have brought in an average of $895 million a year....

There are similar studies of California and New York City, with similar conclusions. (In fact, after a tax increase on the wealthy in NYC in the wake of 9/11, wealthy people were the least likely to move out.)

Why would this be? Well, duh -- people do stuff for reasons other than precise calibrations of their tax liability:

...Some who study the issue theorize that other factors affecting people’s decisions about moving -- schools, jobs, even the weather -- make it unlikely that a relatively small tax increase would drive those decisions. In states like New York and California, hubs of culture and specific industries, people may also stay out of a desire to live and work near others like themselves.

"People move to maximize their utility," Professor Massey said. "The $64,000 question is, what is their utility? There are taxes and income, but there are issues about jobs, local amenities in the state, family." ...

Yeah -- can you even get the kind of job that made you wealthy in Bugtussle? In Bugtussle, can you buy the cool, chic, pricey stuff your money allows you to buy? If you're a master of the universe in Bugtussle, isn't that a rather puny universe?

And yet politicians fear they'll drive the wealthy away with higher taxes. But this, to the rich, is what moving to Canada was to Bush-haters: the subject of a lot of talk, but not a lot of action.

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