Earlier this year, a study by the Political Economy Research Institute at the University of Massachusetts threw cold water on the GOP claim that wealthy Americans will uproot and leave a state that raises their taxes. “The evidence available in the research literature suggests that the worst fears of the policy debates over raising additional revenue from high-income households to sustain spending on public services are unlikely to materialize. The rich will not go on strike. They will not cease working, stop investing, or even move,” the study said.
Another study is now backing up that finding. Professors from Princeton and Stanford looked at California’s implementation of a tax hike on the rich in 2005 and found that — contrary to the GOP storyline — migration of millionaires actually declined:
Using difference-in-differences models, which compare migration trends of the group experiencing the tax increase to a group of high-income earners not facing a tax change, neither in-migration or out-migration show a tax flight effect from the introduction of the 2005 Mental Health Services Tax. In fact, out-migration has a “wrong-signed” estimate: out-migration declined among millionaires after the tax was passed (both in absolute terms and compared to the control group). In other words, the highest-income Californians were less likely to leave the state after the millionaire tax was passed.
According to the study, divorce was a much more important factor in millionaires leaving California than a tax hike. “The tax policy changes examined in this report are very modest compared to the life impact of martial dissolution,” the researchers found.