Probably the toughest mountain to climb in this country is reversing the three-decade Reagan-era damage to the notion that paying taxes is part of what we do to live in a decent society. One of the cornerstones of the anti-responsibility meme is rich people will flee a state that raises taxes. The problem is that that argument is false.
In New York state, there has been an effort underway to modestly raise taxes on people making more than $250,000 a year ("modestly" because my own view is that the proposal does not go far enough but that’s a different debate). Our so-called "liberal" governor seems to have lost his way–in more ways than I care to recount–and has steadfastly opposed the taxes, partly by repeating the right-wing meme that rich people will leave the state.
Today, a good piece in The New York Times destroys the argument:
It is perhaps the most potent argument offered by those who oppose increasing the income tax on wealthy New Yorkers: If you raise it, they will flee.
That case has been made repeatedly by Gov. David A. Paterson, who says that higher taxes should be a last resort. It has been featured in a campaign by Taxpayers for an Affordable New York, a coalition of real estate and business interests. And it has been on the mind of Mayor Michael R. Bloomberg, New York City’s richest person, who said in a radio interview, "You can’t tax too much those that can move."
Yet there is surprisingly little evidence to support the proposition that rich New Yorkers would bolt if forced to pay higher income taxes. Though tracking the movement of wealthy taxpayers from state to state is difficult, experts on public finance and migration say they have yet to document a substantial "rich drain" in states that have raised income taxes in recent years.[emphasis added]
And there is evidence from other states as well:
New Jersey raised taxes on the wealthy in 2004, increasing by 2.6 percent the tax rate levied on those making more than $500,000 a year; and Gov. Jon S. Corzine this month proposed a new increase on high earners.
But a study by Professor Massey and two colleagues, published in September, estimated that the previous tax increase cost New Jersey only 50 to 350 existing "half-millionaire" households — a relatively small number against the total of 44,000 such households in the state.
While those departures cost the state about $38 million a year in revenue, the study estimates, the higher taxes levied on those who stayed have brought in an average of $895 million a year. Also in 2004, California voters approved a 1 percent income tax surcharge on personal income over $1 million, and Silicon Valley and Beverly Hills appear to remain well populated with the wealthy. From 2004 to 2007, according to a study by the California Budget Project, a left-leaning research organization, the number of millionaire taxpayers rose by close to 50 percent, well outpacing the 8.6 percent growth in the total number of those paying personal income tax.[emphasis added]
Beyond the economic crisis we now face, we have to win back the argument that every economic ill is not solved by tax cuts and that, in fact, we have plenty of money in our society to do the right things for the people if the rich start paying their fair share.
It’s never too early to have that debate, especially when the facts are on our side.
