Yes, Virginia, The Rich Do Indeed Flee From High Tax Countries


By Bernie on 10 Dec 2012


The Rich Do Indeed Flee From High Tax Countries
Photo Credit: Jeff Durham/Bay Area News Group

I do not deny the fact that there are millionaires living in high tax states. Studies (1) have shown that millionaires do not simply move to low tax states to save on income taxes. That said, however, it actually depends on the type of millionaire you are.

If you have a pool-cleaning business generating a million dollar profit annually that caters to the super-wealthy in Hollywood, California (state tax of 10.55% on income over $1 million) you are obviously not going to move your business even a few hundred miles to Washington State (0% state income tax) where there are significantly fewer pools and 5 times fewer millionaires (2) just to save a hundred grand because you certainly won't earn the same million profit in Washington in the pool cleaning business.

On the other hand, suppose you are making that same million a year profit but from dividend income instead. Then it doesn't matter where your main residence is because you can have a second home in California but not be subject to their taxes (California taxes dividends the same as ordinary income). Now it does pay to move out of a high tax state.

So although tax & spend liberals can point to studies showing that many rich people stay put in high tax states, it is also true that many rich people leave. Take for example what happened in Maryland: In 2007 Maryland legislators approved a "millionaire's tax" of 6.25 percent on incomes of more than $1 million a year. The result? According to socialists, it should have been more tax revenues. The actual, real-world result: the state lost $100 million in tax revenues and ended up with a thousand fewer millionaires to fleece (3).

It may not pay those who make only a million dollars a year to flee the state or even the country, but if your income is from investments that make mucho millions then it's a no-brainer that the best thing is to renounce your citizenship and take residence in a no-tax or low-tax country. Eduardo Saverin would have been an idiot to pay hundreds of millions in taxes just so Obama could redistribute that money to an ever-growing number of moochers; see my post Obama and the Transformation of America.

And if the tax rate becomes confiscatory then even those making only a few million a year may find leaving their country more pleasant than sharing their wealth: for example, a third of the population of the Belgian village of Nechin is filled with French who have fled their country in advance of a 75% tax on all earnings over one million euros (4).

When I was 13 years old I grew crystals as a hobby. One of my favorites was potassium aluminum sulfate dodecahydrate crystal which formed an octahedron which looks like two pyramids stuck together at their bases. I noticed that I could dissolve this chemical in great quantities in hot water way beyond its normal saturation point by cooling the solution slowly. I could initiate the crystallization process with a trigger such as introducing a seed crystal or foreign object or shaking the beaker. All super-saturated solutions have a trigger, a tipping point beyond which they can't stand it anymore. They seem to have reached it in France with a 75% tax.

We wait to see what the tipping point will be here in America.




ENDNOTES


(1):

San Jose Mercury News, Superrich stay put in high-tax states like California

An analysis by this newspaper of IRS tax-return data shows that states that charge high income taxes -- from California to New York to New Jersey -- are home to the highest number of rich people per capita. And two-thirds of the states that don't charge any income taxes actually have fewer numbers of millionaire residents per capita, the analysis shows.

(2):

netstate.com, Millionaires of the 50 States, Listed by Number Per 1,000 Households in a State

Income information by number of millionaires per 1,000 households in a state.
RankStateMillionairesPer 1,000 HouseholdsMedian Income
1.Hawaii29,42343.1$57,572
2.New Jersey207,69342.5$59,989
3.Connecticut84,50841.4$57,369
4.Maryland132,35439.1$58,347
5.Massachusetts141,18637.1$54,617
6.California663,39435.7$51,647
7.Delaware17,93934.7$50,970
8.Virginia159,39534.0$54,301
9.New York368,38833.6$46,242
10.Florida369,91233.6$42,079
11.Illinois243,35033.1$47,978
12.New Hampshire26,49832.8$58,223
13.Colorado89,89631.8$52,011
14.Alaska12,16731.5$55,935
15.Minnesota99,24631.0$56,084
16.Arizona105,72230.9$44,748
17.Michigan190,87130.6$45,793
18.Washington118,13230.3$50,885

Information souces: U.S. Census Bureau, www.census.gov, February 27, 2008
Phoenix Marketing International, www.phoenixmi.com, February 27, 2008

(3):

Planck's Constant, The Laffer Curve or Who is Laughing Now?

The state couldn’t balance its budget last year and created a millionaire tax bracket, raising the top marginal income-tax rate to 6.25%, hoping to close the gap, assuming the rich would just bend over and take it.

One year later and one-third of the millionaires have disappeared from Maryland tax rolls 2. Instead of gaining $106 million from millionaires the state lost $100 million.

(4):

UK Daily Mail Online, 10 Dec 2012, Gerard Depardieu goes into tax exile in Belgium… 800 YARDS from the French border

French film star Gerard Depardieu has moved into his new 'tax exile' mansion in Belgium - just 800 yards from the border with France.

The 64-year-old actor's lavish home in the village of Nechin - on a street known as Millionaire's Row - is less than two minutes drive from the French town of Roubaix.

Depardieu is the latest wealthy Frenchman fleeing a looming new tax of 75 per cent on all earnings over one million euros - about £850,000.

...

France's Le Point news magazine said: 'Nechin may be less glamorous than London, Geneva, Brussels and its climate is less pleasant than Monaco, but it has become a tax haven for rich families from northern France.'








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