Do Taxes Really Cause the Rich to Move?

Like its economy, America’s tax system is heavy up top—especially at the state level, where payments from the super-rich form a substantial share of revenue. When hedge-fund magnate David Tepper announced he was moving from New Jersey to Florida, the state estimated that it could face millions of dollars in lost taxes, putting New Jersey’s revenue base and budget at risk. Indeed, income tax rates vary considerably across states, from zero in places like Florida to nearly nine percent or more in states like New York.

With inequality rising and related political concerns rising faster still, a number of states have imposed millionaire taxes in an effort to close the growing wealth gap, redistribute income, and generate more revenue. But to what extent do the super-rich actually move away from a state to avoid taxes? That’s the key issue addressed in a new study published in the American Sociological Review by Cristobal Young and Charles Varner of Stanford and Ithai Z. Lurie and Richard Prisinzano from the U.S. Treasury Department. To get at this, the authors used detailed IRS data on the tax returns of all million-dollar income-earners in the U.S. between 1999 and 2011.