Taxes Aren’t Driving Millionaires from California, Stanford Study Finds
A newly released study by two Stanford professors debunks assertions by tax foes that California’s “high taxes,” including past increases and those pending on the November ballot, are leading millionaires to leave the state in droves.
“Millionaire Migration in California: The Impact of Top Tax Rates,” by Stanford Professors Charles Varner Cristobal Young, concludes that the number of millionaires in California fluctuates not because of “net migration,” but because the flow of money results in some rising into millionaire status one year and falling out the next.
The researchers conclude that those who become millionaires are “having a good year” and are reluctant to move out of state.
Further, neither tax increases nor tax cuts had a significant effect on the number of millionaires entering or leaving the state, the researchers conclude:
“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.”
The issue of whether a millionaires’ tax is counterproductive is one that has been raised by opponents of Proposition 30, the governor’s revenue measure that would provide billions for schools by raising income tax rates on the state’s top 1% wealthiest residents and temporarily boosting the sales tax by 0.25%.
For more information about the study, see Millionaire Migration in California