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Monday, October 24, 2016

For years, conservatives have argued against attempts to raise taxes on the most affluent Americans by warning that it will cause the wealthy to flee to other states with lower rates.

The narrative picked up steam when progressive Democrat Bill de Blasio was elected mayor of New York City, campaigning on a plan to raise taxes on those making more than $500,000.

“De Blasio’s anti-rich policies are driving wealthy people out of NYC,” the New York Post claimed in March.

Fox News host Sean Hannity encouraged a competition between low-tax states for the prize of his residency, gloating that “I can’t wait to pay no state income tax down in Florida or Texas.”

“New York is a city of financial entrepreneurs, of genius stock traders and bankers. It would be a smart idea to keep it that way. It’s not a city that’s going to benefit from high taxes because people who have substantial incomes have a choice,” socialite Jacqueline Weld Drake warned in October. “They have a choice of venues. New Jersey beckons. Florida beckons. All kinds of other states who do better at job creation. We are really biting the hand that feeds us. No question about it.”

But according to a new analysis from the New York City Independent Budget Office, that Randian fantasy is not borne out in reality.

The study, which was prepared by Julie Anna M. Golebiewski, finds no evidence that wealthy New Yorkers are fleeing the city in droves to live in low-tax states. The study finds that 42 percent of households with a real income of over $500,000 that moved in 2012 did so within New York state.

The second favorite destination for high-income households was neighboring New Jersey, at 22 percent. Connecticut placed third at 12 percent, and California was fourth at 9 percent.

In other words, when a wealthy New York City household moved, more than four times out of five it moved to a blue state with a higher-than-average income tax.

IBO table
Chart via New York City Independent Budget Office

Moreover, high-income New Yorkers were not more likely to move than the rest of the city. Households with a real income above $500,000 moved at the same 1.8 percent rate as households below that threshold.

The data is from before de Blasio became mayor. But it’s unlikely that his election has caused a dramatic shift; studies have repeatedly shown that higher taxes are not a main factor in wealthy Americans’ decisions to relocate.

As Robert Tannenwald, Jon Shure, and Nicholas Johnson put it in their 2011 paper, Tax Flight Is a Myth, “raising taxes won’t spark a large wave of out-migration, and cutting taxes won’t spark a large wave of in-migration.”

AFP Photo/Stan Honda

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  • susanthe

    Don’t let the door hit you on the way out, Sean.

    • Sand_Cat

      Why? He could use a good whack! It might knock some sense into him, though I doubt it.

  • Dominick Vila

    What right wingers don’t seem to understand, or know but dismiss because it discredits their claims, is that not every wealthy American is a Romney.
    Most wealthy American remember their roots, have a sense of patriotism and, most importantly, they have a sense of humanity that is conspicuous by its absence when it comes to the GOP. For many of them, helping our most vulnerable citizens, the poor, the infirm, and those willing to work hard to overcome the challenges they face, are important enough reasons to pay a little more in taxes than become disciples of the Devil and keep a little extra change in their pockets to buy the latest cell phone.
    Last, but not least, is the pleasure of living in a city or state where people enjoy the pleasures that come from shopping in sophisticated stores, going to wonderful restaurants, and socializing with people who share their interests and lifestyle.
    There is nothing wrong with Texas or Florida, at least not on the surface, but with the exception of seniors looking for mild weather and inexpensive housing, the well to do prefer to live in places that meet their expectations, even when doing that means they have to pay a little more in taxes.

    • paulyz

      You are completely incorrect on the Patriotism of Romney. He donated his entire inheritance & made it on his own. He took it upon himself to fix the Olympics. He took risks to create businesses that employ a large number of people.
      As for the “pleasures” of living in big cities, many are becoming bankrupt, have a high crime rate, and terrible inner-cities. Many people have fled California to Nevada. And what does N.Y. do when their unemployment rate is high? Why, a very Conservative policy of offering businesses tax breaks for 10 years to relocate there! !

      • Sand_Cat

        Yeah, Mitt’s just a saint. That’s why he supported policies to screw everybody but his own class, and planned to lower his own taxes still further from the far-less-than-his-share rate he already pays. But then, Pauly, we all know you’re an ignorant jackass who will say anything.

      • iowasteve

        LOL Romney? Are you talking about the same Romney that ran for President?? The only risks he took to create businesses – which do NOT hire people from outside – were the risks he took in destroying other businesses to support his own pet projects. And the “I Fixed the Olympics” is getting a little old – that’s all we heard for months during those debates and it doesn’t say a thing for him. I”m also willing to bet if those Olympics were not in his Mormon home state, he wouldn’t have done anything to help. But on the other hand, he SHOULD have helped. What would help would be for Romney and the others like him to stop relying on loopholes to get out of paying their fair share of taxes and actually pay them. We all know he doesn’t pay what’s fair either – he even admitted it – but then those loopholes that the rich would never allow to be closed helped him do it legally, of course. This is the real reason the GOP refuses to talk about flat tax or replacement of the IRS with a national sales tax to be sure EVERYONE is taxed equally.

        • Allan Richardson

          I agree with your point about Romney and other tax avoiding wealthy people. However, a national sales tax, like the sales taxes in states which already have them (are there any which don’t?), is that they are REGRESSIVE, that is lower income people pay more in proportion to their income than higher income people do. The reason (says Captain Obvious) is that the lower a family’s income, the greater percentage is actually SPENT on consumer goods, as opposed to SAVED, and all of that is taxed (some states do not tax food or medicine, which helps a little, but the tax rate on taxable items has to be higher to balance out). Even what higher income people DO spend is often on SERVICES, which are not taxed; so instead of buying a lawnmower and gasoline and paying tax on those purchases, the upper income people HIRE a lawn care service, which is not taxed (Florida once experimented with a services sales tax, but had to repeal it because of pressure from newspaper publishers on behalf of subscription delivery people; they felt it eliminated the incentive to subscribe rather than pick up a paper irregularly at a store or vending box).

          The original Fair Tax proposal tried to solve the regressive problem by suggesting that a “prebate” of the amount of sales tax needed to spend a poverty level (or some small multiple thereof) income be sent to EVERYONE once a month (once a year would not be much help to families living from paycheck to paycheck). But given how hard it is to get refunds from the IRS to lower income taxpayers who are likely to change addresses or bank accounts (or do not have bank accounts) after they file for refunds ONCE A YEAR, someone realized that the bureaucracy needed to get that money into the pockets of these underbanked people who have to move frequently would be a BIGGER bureaucracy than the IRS could ever be.

          Flat rate income tax SOUNDS good, but any rate high enough to collect from middle class taxpayers enough to run a reasonable government would be resisted by some of the wealthy, who could well afford it, “just because” they feel they are entitled to pay no taxes at all. And any rate low enough that millionaires and billionaires would not complain would be too low to finance a government. And there ARE reasonable moral arguments for excluding some income from taxation. What about a $50,000 a year taxpayer who could normally pay the flat rate on all his income, but had $30,000 in medical bills that year? We would be back in the loophole business. There is something to be said for starting those loopholes from scratch, but many Americans would suffer between the initiation of the flat tax and the time that Congress finally gives them some relief.

          I say we should keep the progressive rates, but apply them to ALL forms of income that represent the personal equivalent of “net profit.” That would mean giving deductions for ALL expenses required to go to a job, uniforms, commuting costs, required continuing training, drug screening, licensing, etc. that the employer does not pay, FROM THE TOP (i.e. as “adjustments” rather than “itemized deductions”), and eliminating phony tax shelter loopholes. And how about age? If the owner of a mine OR OIL WELL can depreciate the value of that mine as the minerals available are used up, why not the owner of a body that has less physical ability to work as it ages?

          • iowasteve

            Actually I believe that the national sales tax would work fine – and there are many states that DO tax services – and as amazing as it might seem – their mostly RED states. Some examples are NY, PA, TX, OH, and IA. And FL does if there are materials attached to the services – so most services would be taxed there as well. There are more, I’m sure. Some of the other reason why I think it would work as is – is that although you may be right that some of the rich would pay someone else to do things. The rich also have very expensive tastes, however, when it comes to furnishings for their homes – and there isn’t any poor or middle class that buys the same class of cars, trucks, and boats (yachts) that the rich purchase. And the other GREAT reason is all of the talk about the illegals here not paying taxes, They would definitely be paying taxes with a national sales tax to eliminate the IRS. It was calculated at one time that this HR25 proposal would have increased the income for the government to the point where it would also be able to support social security and medicare. That sounds like a goldmine to me. Comments?

      • Dominick Vila

        The story advanced BY Priebus about Mitt Romney donating his entire inheritance is questionable, considering what Mitt Romney himself said in early 2012:
        “I could have stayed in Detroit like him and gotten pulled up in a car
        company,” Romney said at the debate. “I went off on my own. I didn’t
        inherit money from my parents. What I have, I earned. I worked hard, the
        American way.”
        Trying to turn a guy who made much of his fortune speculating, taking advantage of foreign tax shelters, and buying companies in trouble to liquidate them, make a profit, and hut them down, is nothing short of amusing. I admire people who become rich because of their ingenuity and hard work. I despise cheaters and opportunists.
        Yes, many cities that were prosperous 50 years ago are now in ruins. The reasons are not surprising. Cities that depended on industries such as steel mills lost population and revenues when companies moved their operations overseas. Anti-labor sentiments and greed resulted in some companies moving their operations South, where scared blue collar workers are eager to work for a fraction of the pay and below average benefit packages. I would not be surprised if the same happens 30 or 40 years from now in places like Silicon Valley and Seattle, when the products developed there are built in countries like Bangladesh at a fraction of the cost, or new technologies or concepts make them obsolete. Ruins of old cities are not new. You can visit them worldwide, and before long you may be able to find them right here, in the ole USA.

        • TomJohn4640

          Hey Dom, for someone with an advanced power of reasoning like yourself, it’s too bad you don’t use these powers for good, instead of the evils of socialism. A free market is just that, free. We are free to invest in what makes the highest profits today. No one could predict what happened to our industrial belt, except perhaps those who foresaw what the un-checked power of unions would ultimately create. You blame the Romneys of the world. I blame unions, Democrats, and their cronies.

          • Dominick Vila

            Unions fought for livable wages, paid vacations, paid sick leave, maternity leave, a safe environment, and other benefits to raise the standard of living of the American middle class from what prevailed in the days of the company store, to what exists in most industrialized nations. Yes, those cities may have continued to prosper for a few more years had their citizens accepted Third World salaries and benefit packages, but is that what we should aspire to have?
            I admire those who use their intelligence, those who have initiative, and those who work hard and accumulate a fortune. I despise cheaters.

          • TomJohn4640

            Like I said, too bad you don’t use your intellect for good. You waste it on the old and tired phraseology of Socialists, an ideology that has failed every time it has been implemented. The poorest American lives better than 90% of the rest of the world (as long as they know how to take care of themselves). Why? Free Markets, and a work-ethic that is now sadly fading in the age of expanding hand-outs from the Obama administration

          • TZToronto

            Why should any American live below the level of 10% of the people of the world? Why shouldn’t America strive to have the best standard of living–for everyone–or any country in the world. I guess that happiness is overrated. I’ve looked at a few lists of the happiest countries in the world. One list has Costa Rica, Norway, Denmark, Vietnam, Canada, The Netherlands, Belize, Sweden, and El Salvador. Heck, the U.S. isn’t even at the top of the entrepreneurship list.

          • Dominick Vila

            Judging by what you said about the standard of living of people overseas, I have the feeling I forgot more about what I learned during my 30 years abroad, than what you will ever know about that subject. Your claim that the poorest American lives better than 90% of the population of the world is hyperbole on steroids. Yes, we live better than people in Third World countries, but the standard of living of our poor and even our middle class is lower than what people in most Western European countries, Australia, New Zealand, Canada, and Japan enjoy. The same goes for Arab countries like Saudi Arabia and Qatar.
            Communism is, indeed, a failed ideology, and so is socialism as defined by Marx and Engels. If nothing else because it stifles productivity, innovation, and progress. That does not mean, however, that government run social programs are inefficient, ineffective, or not needed. Programs such as Social Security, MEDICARE, ACA, and transportation programs, for example, accomplish things that private industry is not interested in because of low return on investment.
            Unfortunately, the political polarization that exists in the USA does not lend itself to pragmatic or constructive dialogue. Both sides are more inclined to exaggerate and distort reality than make an attempt to find middle ground.

          • toncuz

            What delusional world do you live in? You’re still blaming unions when unions are 9% of the workforce and corporations bribe conservative Congressmen at TEN TIMES any other lobby? You actually think the market is “free” don’t you?

            Do you even know what right-wing central planning is? You think six banks in control of 65% of American assets is a free market? You think that six media conglomerates owning 95% of all media in America is a free market?

            Name one right-wing corporate crony capitalist nation that didn’t end up in revolution…like Egypt or with armed insurgents roaming the countryside…like South and Central American tin-pot “republics”.

            Your nonsense about socialism is just that…utter nonsense. No nation can survive on either strict capitalism or socialism. The social-capitalist countries of northern Europe have zero poverty, zero illiteracy and healthy citizens.

            We put our money into the yachts and mansions of our greediest pigs of society while they invest in national education, healthcare and transportation.

            Their transportation systems alone reduce business costs by TWENTY percent.

            And you think the USA will compete with that going forward while the US is mired in Republican “pig” corporate capitalism? Keep dreaming.

      • Independent1

        Mitt Romney is the world’s leading pathological liar. He started Bain Capital using money he borrowed from his dad. And most of the companies he bought out were foundering and he got them for a song using a leveraged buyout, meaning he never risked any of his own money to buy them. Yet for many of them he stripped them of their assets, let all the union workers go, pocketed their pension funds and made arrangements for companies overseas to pick up their business (making money at every end of the deal) while often leaving thousands of Americans unemployed, older workers with no or reduced pensions, and what pension liabilities there were he foisted on the American taxpayer.

        Mitt’s buyout of the auto industries largest small parts maker Delphi when Obama was trying to save the auto industry is a classic example of Mitts un Americanism – he was willing to destroy GM and Chrysler by refusing to provide them with the small parts they needed to restart manufacturing cars – just to put more money in his pocket. Fortunately a judge overseeing his buyout of Delphi put the kybosh on that little scam.

        Mitt Romney is the most disgusting person on the planet, the low-life of low-lifes. Don’t give us any crap about his generosity – he only ever contributed what he had to because his church required it, or because it saved him money on his taxes. He never contributed to anything because of his good heartedness – he doesn’t know what being good hearted means.

    • Elliot J. Stamler

      Dominick, I won’t comment on Florida but I wouldn’t live in low-low-low tax Texas if I was a billionaire. I would no more consider living in a state that elects creatures like Rick Perry, Ted Cruz, Greg Abbott, Louie Gohmert, etc., that is dominated by the worst, most intolerant bible-thumping Southern Baptist radicals like “Rev” Robert Jeffress and similar bigots, that has a lousy educational system and is proud of that fact. If I paid NO taxes I wouldn’t live in Texas which reminds me of some kind of southern-fried version of a pre-war fascist European state.

      • herchato

        Elliot, you have got to quit holding back son.

  • Jambi

    Don’t even apologize to this “FOX CLOWN”…He’s full of shit….Every time he opens his mouth, he reveals his true ignorance…Only FOX NEWS “Zombies” watch and listen to his pathetic propaganda…

  • midway54

    Surely the dupes are nodding their empty moronic heads in agreement with this uneducated buffoon who has become a millionaire because of his talent for deceiving so many redneck yahoos into cheering for the plutocrats and voting those rightwing poltical stooges into office.

  • Samuel Adams

    What would be more interesting is to see these stats broken down by age cohort. Huge numbers at the younger end exit the city due to the lack of school options–so the highest in nation property taxes in Westchester are tolerated since the math works if you have more than one kid in public school But virtually everyone I know at the upper age levels with significant income and assets very carefully plans their exit at retirement. And this means doing things like managing deferred compensation, non-qualified plans, capital gains etc so the realization does not occur in NY. That is where the real money is and it ain’t hanging around in NY.

  • TomJohn4640

    Hey Libs – your wealth (or is it average sized penis) envy only contributes to my already formed opinion of your inability to analyze facts, not your teen-aged sensibilities of “fairness and equality for all”. Common sense tells you that while higher taxes might not force a move (which may cost more than the increase in taxes), once someone decides to move, they will pick the least expensive alternative, all other things being equal. Sorry if that is too much logic for you to process in your under-developed minds.

    • john

      No one picks Mississippi. It may be the lowest cost destination, but it realistically is a third world country. Sorry.

    • booker25

      Only in Hannity mind would anyone leave NY for a red state.

    • Elliot J. Stamler

      Insulting people and making such an idiotic juvenile remark about the size of penises of people you disagree with entirely eliminates any possibility of sensible people taking you seriously. Are you so childish you don’t realize that? You won’t apologize of course…people like you never do.

  • truthinnumbers

    NY had 41 electoral votes in 1980. Now NY has 29. Some people are moving from NY, or not moving to NY.

    Didn’t Hannity mention lower taxing states (such as NJ), not necessarily just LOW tax states?

  • thesafesurfer

    Here is a record of New York states electoral votes over the last thirty years.
    I don’t claim to know what has caused New York to decrease steadily relative to the rest of the nation over the last 30 years, but decrease it has.
    New York City dominates the state of New York.
    When will the Empire State’s downward spiral halt? People sure aren’t moving to it relative to the rest of the nation over the last three decades.

  • tipster4

    The article tries to demonstrate that the rich aren’t fleeing NY. High income NY-ers aren’t leaving faster than any other group. As a matter of fact, NY is growing, albeit slowly. The issue is NY is growing slower than the rest of the nation. And immigrants from other states (as well as from outside the US) have a lower net income that the emmigrants. One of three 18-35 year olds will leave NY state and not return. NY state will not implode. It will just continue to lag and lose power in Congress. As an ex-NY state resident, I assure you, the taxes (income, property and sales) did enter the equation when presented with an opportunity to move elsewhere. All things being equal, I not only kept several thousand dollars in my pocket, I spent less on the things I had to buy (not to mention some warmer weather, lower heating bills, and much lower insurance premiums).

  • john

    Trust me. If you are making $500K a year, an extra $25K in taxes means nothing. There are two types of wealth in NYC: Those that work there and whose commuting and residential costs would total more than $25K; And those who rely on capital gains, who have a very low tax rate. If in NYC you are making $75K the city is never going to be cost efficient. If you are worried about thousands of dollars you are not part of the targeted poll.

  • Elliot J. Stamler

    As a state and city New Yorker I consider this a markedly misleading article. Those of you from outside NY take it from me, Henry Decker is not telling you the whole truth. If you want lower income taxes our neighboring states of NJ and Conn. aren’t where you’d go-they’re very high tax too plus NJ has sky-high property taxes. But some wealthy and not so wealthy people are leaving for lower-tax venues. Also for those of us in NYC many leave not as much because of the very high taxes but because of the unbelievably high rents and lack of affordable housing. There are wonderful things about being a New Yorker (state and city) but you pay a substantial premium to live here and some people eventually get sick of it..not to mention sometimes just can’t afford it. Here in NYC we even pay a CITY income tax and even a tax on taxi rides (that goes toward public transportation), a higher sales tax than the rest of the state, etc. I love my state-and my city…but even I am thinking of moving to an exurb of the city where my property taxes, insurance, etc. would be 70% cheaper than what I now pay in rent!!! Mr. Decker is misleading you with ultra-liberal ideology instead of facts…and I am myself a moderate centrist Democrat, not any sort of conservative.