Last week, New York City’s mayor-elect Bill de Blasio announced plans to move forward with his proposal to expand access to preschool by appointing a group of experts to recruit teachers and identify classroom space. His plan would expand access to full-day preschool to all four year olds, funded by a tax on all residents earning over $500,000.
It makes sense that preschool investments come from tax revenues. The de Blasio plan would increase income taxes by about one-half of one percent on earners making over $500,000. In terms of real dollars, someone earning $1 million per year would see a tax increase of about $2,100. But when we invest in quality preschool, it’s taxpayers who benefit. They see a return on investment of about seven dollars for every dollar invested in high quality preschool programs. That’s thanks to the well-documented benefits of preschool: children who attend high-quality programs are less likely to need special education and more likely to graduate from high school and be successful in the workplace. They are also less likely to become involved in the criminal justice system or have a teenage pregnancy. Early childhood education is one of the best investments we can make — even better than the stock market.
Opponents still argue that increased taxes will cause the richest residents to leave the city. But a large body of research shows that the idea of “tax flight” is a myth. More progressive tax structures that tax the wealthy at higher rates do not appear to impact migration across states. In fact, high-income workers are the least responsive to changes in the distribution of taxation. A Stanford University study of a 2004 tax increase in New Jersey on people making more than $500,000 found no evidence that wealthier earners left the state in response. People earning above that threshold left the state at the same rates of people making between $200,000 and $500,000, strongly suggesting that the reasons people left the state had little or nothing to do with tax rates.
Other research supports this finding. Economists at University of Michigan and Williams College found little evidence that differing state income taxes affect migration, while they did find that estate and inheritance taxes could affect migration. However, they argue that any losses from that migration would “not be large relative to the revenue raised by the tax.” Another study looked specifically at the elderly and found that changes in tax policy have no effect at all on migration patterns among them, even for high-income senior citizens. The authors concluded that the “results are overwhelming in their failure to reveal any consistent effect of state tax policies on elderly migration across state lines.”
The city’s wealthy don’t seem to be concerned about de Blasio’s plan. A recent poll found that 68 percent of New York City residents support a tax hike to fund preschool, including 58 percent of earners making over $100,000 per year. They may recognize that investing in preschool offers New York City an opportunity to narrow the achievement gap and save money in the long run without jeopardizing its tax base in the short term.