James Q. Wilson, “Angry about inequality? Don’t blame the rich,” the Washington Post–argues that income inequality is increasing, but that it’s not something to worry about, partly due to social mobility.
Tax Foundation, “Income Inequality Is Lower Now Than It Was Under Clinton“, via Paul Caron–arguing that inequality has been decreasing.
New Jersey was a good subject for the study, Young said, because it has so many neighboring states with large cities near the state lines, making it possible to move without having to change jobs.
The millionaire tax produces about $1 billion in annual revenue for the state, Young said, while the amount of revenue lost to out-migration of millionaires is $16 million.
The new study comes just days after an economist working in the administration of Gov. Chris Christie (R) reported that the tax was responsible for the loss of 20,000 taxpayers and $2.5 billion in income. The report did not address whether the new revenue from the tax offset those losses.
More here. Turns out I blogged about this before (but not the Chris Christie study).
Via tax.com’s facebook wall, this reuters story is misleadingly titled “Analysis: Americans try to outrun state, local tax hikes.” The first piece of deception is that there is no analysis in the story. The second is that there is no data. Please catch me if I’m just reading too fast, but the only data point seems to be the quote from the accountant that opens the story. The accountant says he’s getting more clients asking about changing their residency for tax purposes.
In contrast, Ezra Klein / The Wall Street Journal did a nice job summarizing a recent empirical study, which concludes the opposite. Look here.
More evidence that the news media has problems accumulating knowledge. Only a couple weeks ago there was coverage of a major empirical study on this question, and now it’s as if it never happened.
One apparent benefit of the new infusion of blog posts into my formerly print-only RSS is that I’m getting more posts about causal questions and academic studies. There are probably reasons for this, including the different incentives of bloggers and reporters.
Anyhow, I came across an interesting study via Ezra Klein (who found it via economic Robert Frank blogging at the Wall Street Journal). The study asks whether states imposing taxes on millionaires leads the affluent to migrate out of state. The finding was no. I’ll just reprint the portions Klein excerpted:
The study found that the overall population of millionaires increased during the tax period. Some millionaires moved out, of course. But they were more than offset by the creation of new millionaires.
The study dug deeper to figure out whether the millionaires who were moving out did so because of the tax. As a control group, they used New Jersey residents who earned $200,000 to $500,000 — in other words, high-earners who weren’t subject to the tax. They found that the rate of out-migration among millionaires was in line with and rate of out-migration of submillionaires. The tax rate, they concluded, had no measurable impact.
If you follow the links, you’ll see the paper was published in the National Tax Journal. I think this is a really interesting and important study. I have two issues, though. One is the authors’ claim that the new tax constitutes an “experiment.” The other is the use of the lower-income bracket (200 – 500k earners) as a “control group.” On the first point, it is highly unlikely that (a) the imposition of the tax was “random” or (b) the wealthy in New Jersey had no say in whether the tax would be passed. Maybe the wealthy in NJ are just really generous; or, maybe they cut a deal that gave them a big loophole. The failure to randomize creates the possibility of all kinds of stories involving selection.
On the second point, on its face I just have trouble seeing the 200-500k group as controls. Maybe their migration patterns would have been different without the tax, too–they might be expecting to become millionaires rather soon (leading them to move more); or, they might appreciate that those above them are paying more of their fair share (leading them to move less).
Fortunately, there is a lot more data out there to be collected so we can get a better quasi-natural experimental design, as pages 278-279 of the paper suggest.
