High taxes don't send wealthy fleeing | Arkansas Blog

Friday, April 29, 2011

High taxes don't send wealthy fleeing

Posted By on Fri, Apr 29, 2011 at 4:26 PM

This is another one of those articles of faith that no amount of factual refutation will dispel. But new studies show "high" state tax rates don't drive away wealthy residents. Oh, there are the occasional greedheads who'll flee to Florida or Texas from Arkansas for a time to shelter some windfall profit-taking on capital gains, though after the state tax is deducted from federal obligations it's only about a 3 percent lick

But ...

"Taxes [have] essentially no impact on causing people to leave a state," says Jeff Thompson, of the Political Economy Research Institute at the University of Massachusetts, Amherst.

In a study tracking 18 years of migration between states in New England, Thompson found that people mostly move for job-related reasons. They go where the jobs are, regardless of whether it's low-tax New Hampshire or higher-tax Maine.

"If you're living in a state and your tax bill goes up by a thousand or two thousand dollars," he says, "that ... pales in comparison to what it would cost you to actually move. And it might not be worth it to have to be farther away from your job, farther away from your friends."

And Thompson says the stickiness of where you live is just as strong for those with higher incomes. In fact, they often have bigger houses, and businesses they can't move, and more ties to a community.

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