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Rob Arnott Predicts Tax Migration Will Double (Due to SALT)

PennyBonds
in Off-Topic
At the same time, the notion that tax rates don’t matter ignores basic economics: Taxes are a cost imposed on success, and people respond to higher prices. Our forecast of a 15 million person migration from high- to low-tax states is hardly alarmist. Academic research has repeatedly shown that taxes are a driving force when it comes to decisions made about where to live and work. We’re merely predicting that the pace of past migration will roughly double, because the tax difference between states has abruptly widened.
https://www.realclearpolitics.com/articles/2018/04/24/the_great_tax_migration__136885.html

Comments

  • LewisBraham
    edited May 2018
    https://campaignmoney.com/political/contributions/robert-arnott.asp?cycle=16

    https://en.wikipedia.org/wiki/Club_for_Growth

    https://usatoday.com/story/news/politics/2013/09/25/club-for-growth-ted-cruz-top-donors-obamacare-government-shutdown-health-care/2867561/
  • davidrmorandavidrmoran
    >> Taxes are a cost imposed on success

    wow, wow, what a phrase that is --- as if nothing is joint and never was, and as if nothing is more important than costs

    race to the bottom --- SaLT makes everyone head out for Kansas, Mississippi, etc.
  • msf
    edited May 2018
    Just Florida.

    Cristobal Young, The Guardian, Nov 20, 2017
    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
    Note: I'm addressing only the comment of where these "millionaires" (actually high income, not high wealth) people move. (Though if tax migration is purely a myth, why does Young characterize these relocations to Florida as exactly that?)

    Early this year, CBPP recommended that high income tax states consider workarounds for the elimination of the SaLT deduction as part of a comprehensive response to federal tax changes.
    Many state policymakers are justifiably concerned that the new tax law’s $10,000 cap on the federal deduction for state and local taxes (SALT) will make it harder for them to invest in schools, roads, and other building blocks of strong state economies. Some are exploring ways to restructure their tax codes to protect taxpayers from the cap. States heavily affected by the SALT caps should give such “workarounds” thoughtful consideration — but should do so as part of a more comprehensive response to the law’s effects, such as described in this paper.
    Could we have some links about CBPP to help us better understand what might be shading its recommendations? Or perhaps list some political contributions by an author?
  • PennyBonds
    Because state and local taxes are no longer deductible against federal taxes, the affluent now pay combined marginal taxes of 39.4 percent in Texas and Florida, versus 51.8 percent for New York City taxpayers and 53.4 percent for Californians. This faux “tax cut for the rich” signed into law by President Trump has delivered a spread of 14 percent between the zero-tax and highest-taxed states
    Would you continue working when the government is confiscating more than 50% of your earnings?
  • msf
    It sounds like you're conflating wealth (affluent, rich) and income.

    Taxes on the affluent are way lower than those figures - just ask Warren Buffett and his secretary. Taxes are even lower now that the supposed "double taxation" they "endure" on their investments has been cut by 14% (35% to 21%). That's a substantially larger cut than a mere 4% or so increase on their other layer of taxes (personal income tax) due to the elimination of the SaLT deduction.

    You might choose to forsake $500K after taxes on a $1M+ income. Personally, I say bring it on - I'd take that $1M job in a heartbeat, even if I had to "settle" for $500K after the dust cleared.

    The use of the word "confiscate" suggests that I get nothing for my taxes. As Hank and others have pointed out, people get a lot of value for their money. Quid pro quo. Some might even say that taxes are the price we pay for civilization.

    A bit more state and local tax revenue could certainly help pay for neighborhood children to get a decent education. In places like W. Virginia, Kentucky, Oklahoma, Arizona, Colorado.
    https://www.politico.com/story/2018/05/01/teacher-strikes-states-tax-increases-512212

    Given that much of the funding for schools comes from property taxes, i.e. taxes on wealth, that brings us full circle to your conflating affluence and income.
  • PennyBonds
    @msf - I am glad that you perceive the value you receive from your taxes is worth 50% of your earnings. Of course saying it may be different than doing it. I was curious what tax rate people would change work behavior, 60% ? 80%? 99%?
  • msf
    edited May 2018
    Perhaps I wasn't clear enough - give me a $1M salary, and I'll gladly give up half in taxes for the opportunity to rake in $500K after taxes. Put me in a minimum wage job, and I would not gladly pay 50% of my wages in taxes.

    Your question implied a $1M salary, because (a) you talked about working (hence wages), and (b) it was in the context that one would be in the highest tax bracket in California, which kicks in at $1M.

    I'd be happy netting $500K regardless of how much the government took - $200K, $500K, $1M, $2M. How many people wouldn't jump at the opportunity to get paid $500K after taxes as a working stiff?

    Okay, I guess we're back to Buffett. Him and who else:-)
  • davidrmorandavidrmoran
    edited May 2018
    >> How many people wouldn't jump at the opportunity to get paid $500K after taxes as a working stiff?

    Seriously? Lots. Since this appears to be a real question, I'd suggest you do not spend enough time w/ rage-filled libertarian types, or greedhead plutocrat-wannabes, and any of the very many others who, whether comparing with neighbors or not, are highly aggrieved that their $10k / wk takehome entails the same or more (or indeed even less) going to the various governments. In fact in my experience the working-stiff types are sometimes more prone to this resentment than rent-seekers and investor or lucky-startup types.
  • msf
    They may be aggrieved, but they are apparently loathe to give it up. That is, they are keeping that $10k/week to gripe about; they are not forsaking it on principle.

    (You did say that it was their $10k/wk that caused their consternation.)
  • davidrmorandavidrmoran
    of course

    for some all they can focus on (it seems in conversation or letter-writing) is the amount that goes to govs

    correct, no forsaking on principle or for any other reason
  • msf
    That's the point. The question asked was: Would you continue working when the government is "confiscating" more than 50% of your earnings?

    Your answer is: of course. These people may gripe about it, obsess about it, but they'll take the money and run. One might even say jump at the opportunity:-)

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