The rich won’t leave
Writing in The Guardian this week, Cristobal Young, the author of The Myth of Millionaire Tax Flight: How Place Still Matters for the Rich, has countered the often made claim of conservatives that higher taxes would mean that the rich would flee.
The received wisdom, according to Young, is that wealthy people only stay because they are offered favourable rates of tax; charge them too much and they’ll take their wealth, and their business elsewhere.
Whether that be another European country, the USA or even some tax haven in far flung climates, they will flee we are told.
The research that Young has produced, however, disputes this received wisdom and instead asserts that place matters for the wealthy. If you are born and raised somewhere, the data suggests, an extra 5% on your tax bill per year is unlikely to mean you leave a lucrative market or somewhere that you have ties to.
In researching the tax returns of over 3.7 million high net value individuals in the US, Young discovered some interesting trends. He told The Guardian, it turns out that place still matters for the rich – much more so than we might think.
“Only about 2.4% of US-based millionaires change their state of residence in a given year. Interstate migration is actually more common among the US middle class, and almost twice as common among its poorest residents, who have an annual interstate migration rate of 4.5%.”
Not only this, but migration, he says, isn’t something that the rich tend to partake in. Poor people and young people are much more likely, twice as likely in fact, to move home due to instable work or poor earnings or high crime.
When it comes to millionaires who do move states, Young reports that only around 15% of interstate millionaire migrations bring a net tax advantage. The other 85% have no net tax impact for the movers.
He also decided to do some analysis of The Forbes Rich List in order to garner whether the world’s billionaires could provide a better, more international, picture for rich migration. Interestingly enough, about 84% of the world’s billionaires still live in their country of birth. Of the billionaires who moved abroad, most moved before they became wealthy.
How many billionaires moved country after they became wealthy? 5%. Whether that is to do with tax, or any other factor, the statistics show that the world’s wealthiest people much prefer to stay where they are. It seems that the old received wisdom that rich people will simply up and leave should you tax them too much is at best naively thought of and at worst, an outright lie.