The Myth of Tax Flight

News that a hedge fund billionaire picked up his business and moved from New Jersey to Florida renewed the debate over whether the rich flee states with higher taxes.

David Tepper, one of the richest individuals in the United States, will save millions of dollars by moving his family and his hedge fund, Appaloosa Management, to income tax-free Florida.

Small government advocates and budget hawks seized upon Tepper’s move to bolster their argument for tax cuts.

Fortune magazine columnist Travis H. Brown said that until New Jersey lowers taxes on the wealthy, “taxpayers will continue looking for the nearest exit out of the Garden State.”

But do taxes really determine where millionaires and billionaires choose to live?

An article in the April edition of the American Sociological Review, suggests that the impact of higher taxes is insignificant.

The authors said the most striking finding of their research is “how little elites seem willing to move to exploit tax advantages across state lines in the United States.”

The researchers looked at 45 million tax records. About a half a million households have a $1 million income, and only 2.4 percent move in a given year.

The wealthy are less likely than the poor to move. They typically have strong ties to their communities because they are married with children and own businesses.

Democratic presidential candidate Hillary Clinton will surely be attacked during the campaign for wanting to raise taxes on millionaires to address inequality.

But as the promoters of small government attack Hillary, just remember: Tax flight is a myth.

This editorial originally appeared in the July-August issue of Public Employee Press.

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