Millionaire Migration: State Taxes and the Demography of the One Percent

• In Event: 047 - Section on Inequality, Poverty and Mobility Paper Session. Inequality, Poverty, and Mobility

Abstract

Do millionaires migrate when state tax rates are raised? Many U.S. states have passed millionaire taxes in recent years, sparking concerns about tax flight among the wealthy. Such migration flows can drain state revenues and limit the ability of states to sustain progressive welfare state policies. We draw on the IRS tax records filed by all million-dollar income earners in the United States between 1999 and 2011, and track the state from which they file their taxes. The data set contains 43 million tax records, representing 3.7 million unique tax filers, and provides a virtual census of top income-earners. Preliminary analysis finds some clear evidence of a small tax migration effect. Raising the effective tax rate by one percentage point leads to a loss, over 12 years, of roughly one-tenth of one percent of a state’s millionaire population. However, migration itself plays a small role in the changes in the millionaire population, and we argue that a broader millionaire demography is needed. The millionaire “birth rate” (domestic production of millionaires) and “life expectancy” (mean years of millionaire earnings) play a much greater role than migration in determining the size of a state’s millionaire population. These population dynamics do not appear to be influenced by state income taxes.

Authors

• Cristobal Young, Stanford University

• Charles Varner, Stanford University

• Ithai Lurie, U.S. Department of Treasury

• Richard Prinsinzano, U.S. Department of Treasury