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Cristobal Young Stanford University
Cristobal Young Stanford University

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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 Download Presentation

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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 ChristieSlide8
Slide9

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?Slide18
Slide19

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 FloridaSlide38
Slide39

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!

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