The rich aren’t going anywhere
We are puttering past brightly colored stucco mansions that line a Florida canal, motoring slowly in our rented boat because signs say there are manatees about. When we see a gray blob deep in the water, we cut the motor.
So far on this day’s travels, in addition to a manatee — a sort of a waterbound legless, trunkless elephant — we’ve seen porpoises and egrets. What we haven’t seen is a sign of life in the mansions that face Samsons Island, a 52-acre preserve in the Banana River.
The island teems with life. The mansions stand like mausoleums. We are told their inhabitants migrate south to enjoy Florida’s lack of an income tax and a pro-business governor (who seems to drop his pro-business stance the moment a business runs counter to his politics).
We have mausoleums in Connecticut, too, multiroom trophies given to capitalism’s winners. Connecticut is second only to Massachusetts in per capita income, and third for the number of households with at least $1 million in assets. The state claims six residents on the Forbes 400 list of richest Americans, and plenty who just missed the cut.
In Florida, signs remind boaters and others to respect species that are fighting a losing battle against encroachment and development. We don’t need such signs in Connecticut, where our tax policies have long treated the wealthy as a fragile and endangered species.
They are far from endangered, and most of us want wealthy citizens to pay more taxes, but certain policy makers and politicians — Gov. Ned Lamont among them — are shy about that because, they say, higher taxes will send rich people skittering off to other states with cheaper (or no) taxes.
But the wealthy don’t tend to flee higher taxes, according to a new report from A Better Connecticut Institute, a nonprofit that studies racial and economic disparities in the state. The fear of losing rich people to lower-tax states is based on flawed data from the IRS. The rich aren’t going anywhere, according to the study’s author, Thomas Cooke, a migration scholar, demographic consultant and University of Connecticut professor emeritus of geography.
The report questions whether so-called “income migration” even exists. Among other sources, the study cites a U.S. Department of Treasury and Stanford University study that tracked the comings and goings of California millionaires and found that their state’s relatively high income tax, which predates the Golden Gate Bridge, has scant little impact on migrations among the rich. In fact, according to the study, wealthy people are tied to their home states by family (as are the rest of us) and by deeply rooted business obligations (which many low-income earners could slough off faster, but still lack the resources to pay for relocation).
From the study: “We often think that the only way for a state to be ‘competitive’ is to be like Texas — a low-tax, low-infrastructure, low-services state. But the reality is that the most competitive places in the U.S., the leading drivers of the economy, and the centers for top talent are New York and California — and they have been for generations, despite higher taxes on top incomes.”
Only Florida — where life is built on sand and hope — shows the slightest indication of low (or no) taxes serving as an attraction but because there is no such migration in other states that lack an income tax, researchers are inclined to believe that climate plays a larger role in bringing in the wealthy (and everyone else).
Connecticut was the 41st state to adopt a state income tax (in 1991, after a brief attempt in the early ’70s). No other state has done so since. Cooke’s study analyzes U.S. Census numbers that say the state’s economy is the biggest attraction for moving to Connecticut — and the most-named reason for leaving, with a net loss of 6,289 people on average every year between 201519.
The second biggest attraction in Connecticut is family, according to the study. In that same time span, on average 20,555 people moved to the state each year for family reasons, while 10,593 left to be with family elsewhere. That’s an average net gain of just less than 10,000 people per year.
So why do certain politicians and policy makers keep saying that higher taxes on the wealthy will make them pull up stakes? Part of that comes from misusing or misreading the IRS data limitations.
And part, said Cooke, “stems from the fact that most people frequently wonder about living elsewhere — the grass is always greener — and that part of that imagining is the cost of living and imagining how wonderful it might be to live elsewhere.”
Statistics say that most people — billionaires, millionaires, and also-rans — tend to stay put.
“Money,” Cooke said, “is explicit. The other stuff is implicit, even though the implicit usually is more important than the explicit.”