Flight Myth
"As state lawmakers consider whether to raise taxes on Vermont's richest residents this year, they are seeking answers to a perennial question: Could higher taxes on the wealthy drive them out of the Green Mountain State?
"Cristobal Young, a sociologist from Cornell University and author of the book "The Myth of Millionaire Tax Flight," told members of Vermont's House Committee on Ways & Means Thursday that such concerns are vastly overstated and often based on anecdotal evidence.
"'Millionaire tax flight does sometimes occur,' Young said. 'It's just that the magnitude is small, and it has very little impact on the stock of millionaires in the state.'
"Vermont legislators are currently mulling over H.828U, which would impose a 3% surcharge on income exceeding $500,000 annually. If passed, the law would impact just over 1% of Vermonters while bringing more than $70 million into state coffers, according to estimates from the Joint Fiscal Office.
"Lawmakers have also proposed H.827 a bill that would tax unrealized capital gains on Vermonters with more than $10 million in net worth. The JFO has not yet presented a revenue estimate for that proposal.
"'What critics argue is that you can't tax millionaires because if you do they'll move away and you won't get that tax revenue,' said Young.
"According to Young, though, the ultra-wealthy traditionally haven't migrated in droves following such tax hikes. Only %2.4 of U.S.-based millionaires move across state lines each year, roughly %15 of whom apparently do so for tax reasons. 'So it's like a small l fraction of a small fraction,' Young said.
"To Young, states should be less concerned with repelling the wealthy, who are usually older and have put down roots, than with attracting recent college graduates, who tend to be more mobile.
"A smart tax system, he concluded, is one in which you 'tax the late-career folks who aren't really going anywhere and use it to invest in the things that attract and provide support and are appealing for future high-income earners.'"
