The Myth of the Rich Who Flee From Taxes

[ProSense]

The Myth of the Rich Who Flee From Taxes

By JAMES B. STEWART

<...>

It’s an article of faith among low-tax advocates that income tax increases aimed at the rich simply drive them away. As Stuart Varney put it on Fox News: “Look at what happened in Britain. They raised the top tax rate to 50 percent, and two-thirds of the millionaires disappeared in the next tax year. Same things are happening in France. People are leaving where the top tax rate is 75 percent. Same thing happened in Maryland a few years ago. New millionaire’s tax, the millionaires disappeared. You’ve got exactly the same thing in California.”

That, at least, is what low-tax advocates want us to think, and on its face, it seems to make sense. But it’s not the case. It turns out that a large majority of people move for far more compelling reasons, like jobs, the cost of housing, family ties or a warmer climate. At least three recent academic studies have demonstrated that the number of people who move for tax reasons is negligible, even among the wealthy.

<...>

The notion of tax flight “is almost entirely bogus — it’s a myth,” said Jon Shure, director of state fiscal studies at the Center on Budget and Policy Priorities, a nonprofit research group in Washington. “The anecdotal coverage makes it seem like people are leaving in droves because of high taxes. They’re not. There are a lot of low-tax states, and you don’t see millionaires flocking there.”

Despite the allure of low taxes, Mr. Depardieu hasn’t been seen in Russia since picking up his passport and seems to be hedging his bets by maintaining a residence in Belgium. Meanwhile, Russian billionaires are snapping up trophy properties in high-tax London, New York and Beverly Hills, Calif.

- more -

http://www.nytimes.com/2013/02/16/business/high-taxes-are-not-a-prime-reason-for-relocation-studies-say.html

[pampango]

1. Nice find, ProSense. This myth is 'partial logic', in which there is a nugget of common sense, but

the evidence and real world experience show that the nugget of 'partial logic' does not actually explain what really happens.

'Partial logic' has become a specialty of republicans. This "rich flee high taxes" myth reminds me of Boehner's "partial logic" that raising the minimum wage will increase unemployment because 'if you raise the cost of employment, you will get less of it'. It contains a nugget of common sense (in general if the price of something is higher you get less of it) but studies and real world evidence show that raising the minimum wage does not actually increase unemployment. Another 'fail' for partial logic.

'Partial logic' works well for republicans because it enables them to ignore facts and the history of what actually happens (when you raise the minimum wage or taxes on the rich), but appeals to the emotion of 'the rich will flee' or 'unemployment will increase'.

[ProSense]

6. Exactly! On this issue:

'Partial logic' has become a specialty of republicans. This "rich flee high taxes" myth reminds me of Boehner's "partial logic" that raising the minimum wage will increase unemployment because 'if you raise the cost of employment, you will get less of it'. It contains a nugget of common sense (in general if the price of something is higher you get less of it) but studies and real world evidence show that raising the minimum wage does not actually increase unemployment. Another 'fail' for partial logic.

...Krugman made a related point. If the suggestion was to suddenly increase the minimum wage to $20 per hour, that would likely have an impact. That would be almost triple the current rate. That is not what is being discussed. In fact, the $9 rate is below the rate if the minimum wage had simply kept pace with inflation, which would put it at $10.80.

Republicans do this all the time. The Bush tax cuts for the rich employed a similar "partial logic." Tax cuts for the 98 percent are stimulative. Tax cuts for the top 2 percent, aside from the fact that they do not need them and they already benefit from loopholes (that need to be closed), do not have the same stimulative effect. Coupling tax cuts for the rich with tax cuts for everyone else and then claiming that they're stimulative is what Republicans argued. It was very calculated. Remember the slew of ads from damn near every retailer pushing purchases with the $300 to $600 Bush tax cuts? Yeah, the rich were going to flock to Home Depot to buy a washer and dryer. Ludicrous.

Krugman: Raise That Wage
http://www.democraticunderground.com/10022393669

OOPS: GOP Rep. Inadvertently Makes The Case For Nearly Doubling The Minimum Wage
http://www.democraticunderground.com/10022374900

[Jackpine Radical]

8. So maybe the solution is to nuggetize reality:

If you increase minimum wage, people have more money to spend, demand for goods & services goes up, & there is more need for workers to meet the increased demand.

On the other hand, if people have no money, they can't spend anything, businesses have fewer and poorer customers, and they have to lay people off.

[Sekhmets Daughter]

18. Have you been reading about WalMart?

Their traffic is way down, because their customer base has taken such a beating. Business Insider had an article in today's issue about this being the end of the big chain stores.

[xtraxritical]

22. If Walmart goes so do we.

[Sekhmets Daughter]

23. To which 'we' do you refer?

[pampango]

20. Great point. So far it seems that Democrats are not as good at 'nuggetizing' reality.

It is a skill that republicans seem to have developed because it relies on emotion and simplicity rather than on the complicated reasons that things actually happen in the world.

[Fuddnik]

2. But, you can always find some dumbass, like Phil Mickelson, who believes that shit.

Poor baby only made $50 million at a minimum last year, but he has to flee California to protect his family's food.

[MynameisBlarney]

3. Damn dyslexia

I was like, hell, I'd flee Texas too.

[Jackpine Radical]

9. Funny--

That was my first response as well.

[lastlib]

14. you have sexdaily? I mean--disexlya? I mean--dyselxia?

Aw, fcuk!

[MynameisBlarney]

16. OLO!

[NewJeffCT]

15. I read the headline quickly

and saw the exact same thing - fleeing Texas

[mountain grammy]

4. When FDR was told the rich would leave America if he raised their taxes, he said:

"I will miss them!" because he was rich and knew it was a total lie!

[Chathamization]

5. The Washington Post has a similar article today about California

The tax increases approved in November are a big reason the state isn’t staring down another huge budget shortfall or the prospect of issuing IOUs to fill it. They include bumping up the sales tax slightly and raising the top income tax rate to 13.3 percent, which is four percentage points higher than the District of Columbia’s and more than double the rate in Virginia or Maryland.

Yet many economists and some young executives in the state say they don’t worry about that high rate chilling growth. Other factors loom much larger for California’s business and economic health, they say, including whether the state can maintain deep pools of highly skilled talent and, in complicated but important ways, the renewed upward march of housing prices in the Bay Area and beyond.

“I don’t think we should be surprised that the state is growing, nor that California is growing faster than the national economy,” said Christopher Thornberg, an economist and the founding partner of Beacon Economics.

http://www.washingtonpost.com/business/economy/will-higher-taxes-on-the-rich-derail-californias-economic-comeback/2013/02/18/13f0b534-7711-11e2-95e4-6148e45d7adb_story.html?hpid=z3

[alc]

7. are off shore tax havens a myth?

Or are they used for reasons other than tax avoidance? It's hard to argue that taxes don't change behavior in ways that avoid taxes.

Whether people physically relocate, or relocate some of their money is a pretty minor distinction. But it seems that lack of physical relocation is often used as an argument for why it can't decrease revenue if taxes are raised too much. Taxes and behavior is a complex issue that needs to be evaluated as a whole, not as many separate issues like physical relocation. Varney and this author are picking data that fits their goals. People (on both sides) need to consider both and not just the one who is saying what we want to believe.

[ProSense]

10. Does a bear shit in the woods?

are off shore tax havens a myth?

Or are they used for reasons other than tax avoidance? It's hard to argue that taxes don't change behavior in ways that avoid taxes.

Whether people physically relocate, or relocate some of their money is a pretty minor distinction. But it seems that lack of physical relocation is often used as an argument for why it can't decrease revenue if taxes are raised too much. Taxes and behavior is a complex issue that needs to be evaluated as a whole, not as many separate issues like physical relocation. Varney and this author are picking data that fits their goals. People (on both sides) need to consider both and not just the one who is saying what we want to believe.

Are you implying that once the rich find their tax uptopia, they no longer rely on tax havens?

There is an overarching factor ignored in the false equivalency that's being created above: greed.

The goal of greedy people who seek to avoid taxes is to pay none.

[MynameisBlarney]

17. Ayup

That's pretty much it.

[Angry Dragon]

12. .........

[pinboy3niner]

13. Funny thing, higher corporate taxes in CA are not causing tax flight

Tax rates are only one factor--and not necessarily the most important one--affecting individual and corporate location decisions.

[JDPriestly]

24. I would answer that rich people in relatively low-tax states

use tax havens same as rich people in high-tax states.

If a rich person lives in Alabama, he will off-shore his money just like a rich person living in California or New York.

Greed is not nearly as rational as people think. It is an emotional, animalistic reaction.

We have avocado trees. Our neighbors have walnuts. The squirrels hide the walnuts in our backyard and then grab our avocados, take a few bites and throw the rest on the ground. They hoard and hide, use and throw away. That is how wealth works. Hoard and hide, use and throw away. Rich people think like squirrels. Very little difference.

I do gardening in big pots. Some of my squirrels can become very destructive if they come back to a pot they used as hoarding/hiding place and cannot find the treasure they hid there. Rich people are the same. Right now, they are destroying America trying to find the treasure they thought they were hiding here.

[BlueJazz]

11. You know, I truly would not be surprised if Fox News ran a story tomorrow morning saying...

Breaking News !!...Aliens from a planet orbiting Vega landed during the night here in the USA and said: "We are contemplating destroying your planet because the rich, in your society, pay way more than their share of taxes."

Fox News interviewed Xzorta (the Captain of his ship) and he stated "Esdret hiju fewyut viouyp blakkew pqrtdds !!"

Which means: Lower taxes on the rich or see your planet destroyed!

Don't Laugh....30 percent of Americans would think: "Well, there you have it .....positive proof"

[krispos42]

19. It has to be done on a national level

No more "state-shopping". Particularly in the northeast, where people can move a few miles, be in a different state, but still have the same job.

It's a bit of a moot point anyway. The rich and super-rich are generally psychologically incapable of walking away from their jobs and their domains of power and influence. They can't just retire young and live responsibly on their accumulated wealth.

[pampango]

26. Even better if it is additionally done internationally through negotiation and enforceable treaties.

Then there would not only be no 'state-shopping' but no country-shopping either. The rich would pay their taxes in their home country with no choice to seek lower taxes elsewhere.

[The Wizard]

21. Stuart Varney

and reality should not be in the same sentence. The shill Varney gets paid handsomely to lie through his teeth for the world's largest propaganda operation.

[GreenStormCloud]

25. Much more than tax rates go into a choice of where to live. N/T