In 2010, New Jersey Gov. Chris Christie (R) vetoed an extension of the state’s “millionaire’s tax,” citing “failed policies of the past.” The move effectively raised taxes on senior citizens while cutting them for the rich. And conservatives have fought similar millionaire taxes in states across the country, arguing that such a tax would stymie job growth and force millionaires to flee to other states with friendlier tax policies.
But a new study based in Christie’s backyard found that New Jersey’s millionaire’s tax, instituted in 2004, had a negligible effect on its millionaire population. In fact, New Jersey’s millionaire population actually grew over the period of the study, even through the recession:
The study found that the overall population of millionaires increased during the tax period. Some millionaires moved out, of course. But they were more than offset by the creation of new millionaires.
They found that the rate of out-migration among millionaires was in line with and [sic] rate of out-migration of submillionaires. The tax rate, they concluded, had no measurable impact.
“This suggests that the policy effect is close to zero,” the study says.
The New Jersey study isn’t the first to find that higher taxes on millionaires have little, if any, impact on migration.
In Maryland, conservatives argued that a millionaire’s tax would drive small business owners and the wealthy out of the state when it was instituted in 2007. And in May 2009, a Wall Street Journal editorial alleged that the tax had indeed driven a third of Maryland’s millionaires out of the state. But examinations of Maryland’s state tax information showed that the recession was a larger factor, as a vast majority of the “missing millionaires” had actually dropped into lower tax brackets due to the recession’s impact on their incomes.
Meanwhile, a study by the Rockefeller Institute of Government found that millionaire taxes had positive impacts on several states. In the first quarter of 2010, California, New York, Hawaii and New Jersey all saw increases in tax revenue over the same period in 2009 after they instituted the tax, again suggesting that the tax’s effect on out-migration was negligible.
Indeed, researchers at the University of Massachusetts concluded earlier this year that taxes are a small factor in cross-state migration. Families, even those making millions of dollars a year, tend to move because of employment or family-related concerns, not because of their marginal tax rate.
Currently, California, Connecticut, Hawaii, New York, Oregon, and Wisconsin have millionaire’s taxes, with New York’s set to expire at the end of this year and Maryland lawmakers attempting to reinstate the tax after its expiration in 2010.