So say conservative economists Arthur Laffer and Stephan Moore in a recent op-ed in the Wall Street Journal. Other economists dispute Laffer’s and Moore’s conjecture by saying there is no connection between high taxes and migration patterns happening in the US.
Laffer and Moore base their thinking on how the new tax changes defined combined deduction limits on state/local/property taxes at $10,000 and that the effective income tax rate (the rate that people actually pay) in California and New York will jump from 8.5% to 13%.
Laffer and Moore also say that payers making $1M or more per year will see potential income tax hikes of 50% or more. These potential hikes would cause, in their view, an exodus of high earners to move to lower or no income tax states.
Cristobal Young, a Stanford economics professor and co-author of the leading study on wealth and tax migration, holds the opposite view. Young and his colleagues Charles Varner of Stanford and Ithai Lurie and Richard Prisinzano of the US Department of Treasury, call Laffer and Moore’s forecasting “pure nonsense.”
Their study on wealth and tax migration analyzed 13 years of income data for Americans earning $1M or more annually and found that only 2.4% of these high earners move every year. This 2.4% move rate is lower than the 2.9% move rate of the broader, average earner. To further emphasize Young’s et al analysis, only 0.04% of millionaire earners move anywhere for tax reasons.
Young et al go on to say that New York, California, and New Jersey have been high-tax states for decades and that those states still have the highest per capita concentration of wealthy people in the country.
Since 2010, the number of millionaires in these high-tax states has been growing, not sinking. According to the latest data from Phoenix Marketing,
New Jersey has added 46,000 new millionaires to its
current total of 258,000 millionaires.
New York has added 84,000 new millionaires to its
current total of 465,000 millionaires.
California has added 169,000 new millionaires to its
current total of 885,000 millionaires.
Phoenix Marketing adds to this above data collected in 2018 by saying yes, 3.5M people have moved from high-tax states to low-tax states but that those movers are mostly low earners who have left because of jobs and/or costs of housing.
If history is any guide to cause-and-effect factors involving taxes and migration patterns, high-tax states will likely continue to create more wealth than the wealth those states lose.
Rather than watching Moore and Laffer’s estimated 800,000 people fleeing high-tax states, the real trend to watch is where Millennials and first-time buyers, now the largest percentage of homebuyers among all demographic groups, choose to establish their beginning households and careers.