The Myth of Millionaire Tax Flight
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I'm not trying to sell anyone second citizenships and residences. So I have no interest in peddling fake news. I have been spending time exploring the thinking of Dr Cristobal Young from Cornell University in NY. Cristobal Young works in the overlapping fields of economic sociology, stratification, and quantitative methodology. He studies the social policies that moderate income inequality, ranging from millionaire taxes to unemployment insurance. His methodological work focuses on big administrative data, model uncertainty, and robust results.
Surprise surprise. Putting aside anecdotes and media hype, super wealthy people are not that mobile.
While travel may be a classic “luxury good”, migration is not. Moving one’s home, life and family to a different place is mostly about people who have a poor economic fit with where they live, earn below-market incomes, and are struggling to find a livelihood. Higher income earners show low migration levels because they are not searching for economic success – they’ve already found it.
When millionaires do move, they admittedly tend to favour lower-tax states over higher-tax ones – but only marginally so. Around 15% of interstate millionaire migrations bring a net tax advantage. The other 85% have no net tax impact for the movers.
Furthermore, almost all of the tax-migration moves are to just one low-tax state: Florida – where low-income taxes comingle with sun, sand and palm trees. Other low-tax states such as Texas, Tennessee and Nevada do not pick up any net tax-migration. So while some millionaires have moved to lower tax states over the years 1999-2011, the flows have been too small to change the geography of the economic elite in America.
The world view
The Forbes list of the world’s billionaires offers an international look at elite migration, and takes us higher up the food chain to the greatest corners of wealth.
Analysis of this list shows most of the world’s billionaires – about 84% – still live in their country of birth. And among those who do live abroad, most moved to their current country of residence long before they became wealthy – either as children with their parents, or as students going abroad to study (and then staying).
The world’s billionaires largely live where they were born or where they began their careers
Only about 5% of world billionaires moved abroad after they became successful. These individuals readily fit the stereotype of a “transnational capitalist class” – unplugged from their nation state, travelling the world for some combination of tax avoidance and cosmopolitan lifestyle.
Many of them can be found in London claiming “non-dom” status to avoid the tax laws of both their homeland and those that apply to British citizens. Others are located in tropical tax havens – such as Sir Richard Branson, who moved to the British Virgin Islands after becoming a billionaire.
These jet-setting billionaires generate a lot of headlines and cynicism about tax flight. But they are anecdotal exceptions. The world’s billionaires largely live where they were born or where they began their careers. The British elite live in Britain, the Chinese elite live in China, and the American elite live in America. After making it on to the Forbes billionaire list, elites are actually more likely to die than to move to a different country.
Here are some of his Publications - Taxing the Rich
What are the social consequences of elite taxation? Does millionaire tax flight undermine state policies?
The Myth of Millionaire Tax Flight: How Place Still Matters for the Rich. Stanford University Press.
For a quick overview, see op-ed in The Guardian
Millionaire Migration and the Taxation of the Elite: Evidence from Administrative Data. American Sociological Review. June, 2016.