Why focus on Millionaire Taxes Piketty Saez Zucman 2018 Distributional National Accounts Quarterly Journal of Economics Top Federal Income Tax Rates have Dropped The millionaire tax ID: 679084
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Slide1
Cristobal Young
Stanford UniversitySlide2
Why focus on Millionaire Taxes?Slide3
Piketty,
Saez, Zucman. 2018. “Distributional National Accounts.” Quarterly Journal of EconomicsSlide4
Top Federal Income Tax Rates have DroppedSlide5
The “millionaire tax
” trend:New Jersey (2004)California
(2005) Maryland (
2008)
New
York
(
2009)
Wisconsin (2009
)Oregon (2009)Hawaii (2009) Connecticut (2009)Minnesota (2013)
State-Level TaxesSlide6
The “millionaire tax
” trend:New Jersey (2004)California
(2005) Maryland (
2008)
New
York
(
2009)
Wisconsin (2009
)Oregon (2009)Hawaii (2009) Connecticut (2009)Minnesota (2013)
States with
No
State Income Tax:FloridaTexas Tennessee New HampshireWyomingAlaska South DakotaNevada Washington State
State-Level TaxesSlide7
“Ladies and Gentlemen, if you tax them, they will leave.”
NJ Governor Chris ChristieSlide8Slide9
Economic embeddedness:
Place-specific social capitalSlide10
Economic embeddedness:
Place-specific social capitalElite income derives from human capital (mobile
) Slide11
Economic embeddedness:
Place-specific social capitalElite income derives from human capital (mobile
) And social capital: Personal and professional connections, colleagues, clients (not mobile
)Slide12
Mobile Millionaires
orEmbedded
Elites ?Slide13
IRS Data
Individual records for all millionaire tax filers, for all states, 1999-2011N ≈ 45,000,0003.7 million unique “millionaires” Slide14
IRS Data
Individual records for all millionaire tax filers, for all states, 1999-2011N ≈ 45,000,0003.7 million unique “millionaires”
Census-scale panel data on where millionaires live and where they move to. Slide15
IRS Data
For comparison, pulled a 1% sample of all filersN (all population) ≈24,000,0002.6 million unique tax filers. Run separate migration analyses for millionaires and the general population Slide16
Measuring Migration
Track people as they change the state from which they file their federal tax returns Slide17
Q1. Where do Millionaires Live?Slide18Slide19
Millionaires per 1,000 PopulationSlide20
Q2. Are
Millionaires Highly Mobile? Slide21
Migration Rates by Income, 1999-2011Slide22
Migration Rates by Income, 1999-2011
Millionaires overall: 2.4%Slide23
Q3. How Much Tax-Induced Migration?Slide24
Do millionaires systematically move
from high-tax to low-tax states?
Q3. How Much Tax-Induced Migration?Slide25
1999 - 2011Slide26
Moving to Higher-Tax v. Lower-Tax StatesSlide27
Moving to Higher-Tax v. Lower-Tax StatesSlide28
Moving to Higher-Tax v. Lower-Tax StatesSlide29
15% “excess”
migration
Moving to Higher-Tax v. Lower-Tax StatesSlide30
Millionaire migration rate: 2.4% 15% of
2.4% ≈ tax migration ≈ 0.3% millionaire
tax-migration rate Slide31
Millionaire migration rate: 2.4% 15% of
2.4% ≈ tax migration ≈ 0.3% millionaire
tax-migration rateBetween 1999 - 2011:
165,000 millionaire migrations
20,000
tax-related migrations
Slide32
Millionaire migration rate: 2.4% 15% of
2.4% ≈ tax migration ≈ 0.3% millionaire
tax-migration rateBetween 1999 - 2011:
165,000 millionaire migrations
20,000
tax-related migrations
Enough to feed the anecdote mill!Slide33
Gravity Model of Migration
Millionaire migrants from state i (origin) to state j (destination) is a function of: Slide34
Gravity Model of Migration
Millionaire migrants from state i (origin) to state j (destination) is a function of: # of millionaires in each state Distance between states Contiguity
Income tax rate (on millionaires)Slide35
Gravity Model of Migration
Millionaire migrants from state i (origin) to state j (destination) is a function of: # of millionaires in each state Distance between states Contiguity
Income tax rate (on millionaires)Control for:
Other state taxes (sales, property, inheritance)
Economic performance (per capita income, unemployment rate)
Natural climate (winter temperature)
Residential land prices (market demand) Slide36
Gravity Model of Migration
Millionaire migrants from state i (origin) to state j (destination) is a function of: # of millionaires in each state Distance between states Contiguity
Income tax rate (on millionaires)Control for:
Other state taxes (sales, property, inheritance)
Economic performance (per capita income, unemployment rate)
Natural climate (winter temperature)
Residential land prices (market demand)
Look at:
$10 million incomes Retirement age (65+) Business owners / “Capitalists” …Slide37
Q3.1 The Problem of FloridaSlide38Slide39
Millionaire Migration FlowsSlide40
Millionaire Migration Flows
(excluding FL) Slide41
This state is the main reason we see tax migration. What is Florida?
Florida Slide42
This state is the main reason we see tax migration.
What is Florida? Florida
Slide43
This state is the main reason we see tax migration.
What is Florida? or luxury resort?
Florida Slide44
Global Migration of the World’s Elite:
Forbes Billionaire ListSlide45
2010 world billionaires: 1,010 individuals with net worth of $1b84% live in their country of birth16% live “abroad”Slide46
2010 world billionaires: 1,010 individuals with net worth of $1b16% live “abroad”Slide47
2010 world billionaires: 1,010 individuals with net worth of $1b16% live “abroad”Slide48
2010 world billionaires: 1,010 individuals with net worth of $1b16% live “abroad”Slide49
Mobile Billionaires?
How many?Slide50
Moved as children
30%
Mobile Billionaires?
How many?
Sergey
Brin
Google
Live ‘abroad’
16%Slide51
Moved as children
30%
Moved early career
39%
Mobile Billionaires?
How many?
Vinhod
Khosla, SUN
microsysLive ‘abroad’16%Slide52
Moved as children
30%
Moved early career
39%
Moved
after
success
31%
Mobile Billionaires?
How many?Richard BransonVirgin Group… to BVI
Live ‘abroad’
16%Slide53
Moved as children
30%
Moved early career
39%
Moved
after
success
31%
Mobile Billionaires =
31% of the 16%Mobile Billionaires?How many?
Live ‘abroad’
16%Slide54
Moved as children
30%
Moved early career
39%
Moved
after
success
31%
Mobile Billionaires =
31% of the 16%= 5% of global billionairesMobile Billionaires?How many?
Live ‘abroad’
16%Slide55
Retention of Billionaires by Country and Tax Rate, 2010
Note: Countries are weighted by the number of billionaires born in each country (as indicated by the size of circle for each country). Slide56
Retention of Billionaires by Country and Tax Rate, 2010
Note: Countries are weighted by the number of billionaires born in each country (as indicated by the size of circle for each country). Slide57
5% of world billionaires are
the “
globals
” – unplugged from their nation states, traversing the world for
a
cosmopolitan lifestyle and low taxes.
Slide58
5% of world billionaires are
the “
globals
” – unplugged from their nation states, traversing the world for a cosmopolitan lifestyle and low taxes.
The other 95% of billionaires live where they were born or where they launched their careers
Slide59
5% of world billionaires are
the “
globals
” – unplugged from their nation states, traversing the world for a cosmopolitan lifestyle and low taxes.
The other 95% of billionaires live where they were born or where they launched their careers
Globalization – for the elite – is mostly about
travel
for business and leisure. Very little is about moving to and living in a different country.
Slide60
5% of world billionaires are
the “
globals
” – unplugged from their nation states, traversing the world for a cosmopolitan lifestyle and low taxes.
The other 95% of billionaires live where they were born or where they launched their careers
Globalization – for the elite – is mostly about
travel
for business and leisure. Very little is about moving to and living in a different country.
95% of billionaires are not any further beyond the reach of the nation state than anyone else.
Slide61
Should States Tax Millionaires? Slide62
Should States Tax Millionaires? Slide63
Revenue-Maximizing “Optimal” Tax Rates
Slide64
Revenue-Maximizing Optimal Tax Rates
= 0.1
= 0.25
= 0.60
=
0.0
0.87
0.73
0.53
=
0.1
0.80
0.68
0.50
=
0.2
0.74
0.63
0.48
=
0.5
0.61
0.53
0.42
=
1.0
0.47
0.42
0.34
=
1.5
0.38
0.35
0.29
0.87
0.73
0.53
0.80
0.68
0.50
0.74
0.63
0.48
0.61
0.53
0.42
0.47
0.42
0.34
0.38
0.35
0.29
Top Marginal Tax RatesSlide65
Revenue-Maximizing Optimal Tax Rates
Top Marginal Tax Rates
To
rationalize
current state tax rates on millionaires -
would need migration effects 10 to 15 times larger
= 0.1
= 0.25
= 0.60
=
0.0
0.87
0.73
0.53
=
0.1
0.80
0.68
0.50
=
0.2
0.74
0.63
0.48
=
0.5
0.61
0.53
0.42
=
1.0
0.47
0.42
0.34
=
1.5
0.38
0.35
0.29
0.87
0.73
0.53
0.80
0.68
0.50
0.74
0.63
0.48
0.61
0.53
0.42
0.47
0.42
0.34
0.38
0.35
0.29Slide66
Millionaire tax flight
does sometimes occur.The magnitude is small has little impact on the stock of millionaires in a stateToo small to matter for current tax policySlide67
Why was the intuition about millionaire migration so wrong?
Places are sticky. As people advance in their careers, they accumulate a lot of things that tie them to place: MarriagesChildren
BusinessesPlace-specific social capitalSlide68
Q5. The Puzzle of Education & Income for MigrationSlide69
Migration Rates by Age, for different education groups
American
Community Survey, 2005-2014.
N
= 23,429,725. Slide70
American
Community Survey, 2005-2014. N = 23,429,725.
Migration Rates by Age, for different education groupsSlide71
American
Community Survey, 2005-2014. N = 23,429,725.
Migration Rates by Age, for different education groupsSlide72
American
Community Survey, 2005-2014. N = 23,429,725.
Migration Rates by Age, for different education groupsSlide73
American
Community Survey, 2005-2014. N = 23,429,725.
Migration Rates by Age, for different education groupsSlide74
American
Community Survey, 2005-2014. N = 23,429,725.
Migration Rates by Age, for different education groupsSlide75
Conclusion: Mobile Millionaires or
Embedded Elites? Millionaires move to Florida, but not to other low-tax states. In the border regions, there is weak evidence that high tax areas have fewer millionaire residents
.The magnitudes of these effects are small.Slide76
Thank
you!
Comments: cristobal.young@stanford.edu