One of the most common arguments against millionaire taxes takes a hit in the National Tax Journal [pdf]:
Drawing on the NJ-1040 microdata — a near census of top income earners — this study examines the impact of a new progressive state income tax. Do progressive state income taxes cause tax flight among the wealthy? The New Jersey millionaire tax experiment offers a potent testing ground, given the magnitude of the policy change and the relative ease of relocating to a different state tax regime without leaving the New York or Philadelphia metropolitan areas. Using a difference-in-difference estimator, we find minimal effect of the new tax on the migration of millionaires. Using the 95–99th percentiles of the income distribution as a “non-33 taxed” control group, we find that the 99th percentile (those subject to the new tax) show much the same trends in migration patterns over time. There are small subsets of the millionaire population that are more sensitive to state taxation. Nonetheless, the broad conclusion holds even when looking at the richest 0.1 percent of households.
These findings mesh well with existing research showing that the migration response to marginal tax policy changes is generally quite small. Our work also addresses the question, “are the rich different?” (Alm and Wallace, 2000), and follows the recommendations of Piketty and Saez (2003) to focus on the behavior of the top 1 percent (and even top 0.1 percent) of income earners. We conclude that, at least in terms of the migration response to state income taxes, the rich are not different — they seem to have much the same non-response as the general population.
In other words, like everyone else, the rich bitch and moan about the taxes they pay but they don’t generally move out of state. The one group that is more sensitive is the retired, but if I understand the study correctly, the outflow of the retired was compensated for by the creation of new millionaires.
I also found it interesting that there’s an established body of evidence that marginal tax rates don’t cause migration. Funny how we never hear about that when conservatives are bloviating about taxation. If anyone who knows the literature could point to a good review paper, I’d be happy to read it and post about it.