Progressive taxes bolster public structures and rich people don’t flee to avoid them

A common claim from anti-tax advocates is that people – especially affluent ones – will leave Washington if we implement an income tax. Mounting evidence suggests this claim is false, and that an income tax would generate much needed revenue to bolster public structures and allow states to make the necessary investments for job creation and economic growth.

Evidence debunking the common myth that people will move due to tax increases is summarized in a new report released today from the Center on Budget and Policy Priorities.  The report examines the relationship between raising taxes and interstate migration throughout the U.S.; it also debunks recent claims about migration between Oregon and Washington.

Main findings from the report include:
• Migration from one state to another is not common.  Between 2001 and  2010, only 1.7 percent of U.S. residents moved to a different state, and only 30 percent changed their state of residence over their entire lifetime.  Most people have strong ties to family, friends, and employment that provide incentives to stay in their state of residence. 

• Cheaper housing – not taxes – is the primary driver of migration when it does occur. People benefit from the large differences in housing costs between states much more so than the differences in taxes.   Several studies claiming that people moved out-of-state due to an increase in taxes failed to properly account for the cost of housing and other important factors associated with moving.  For example, a deeply flawed report claimed that Oregonians were moving to nearby Clark County, Washington following a tax increase on households with incomes over $250,000.   Among other problems, the study failed to account for the relatively cheaper housing in Clark County, which proved to be the main reason for people moving. 

• Tax increases can generate much needed revenue for economic recovery.  After New Jersey raised taxes on households earning over $500,000, the study found that $3.8 billion in additional revenue was raised over the next three years.  In addition, the study found no conclusive link between raising taxes and moving out-of-state.  Raising taxes can produce revenue gains that are critical to maintain essential public structures while the economy recovers, and allow for investments that would help create jobs. 

Read the full report for more information about how progressive taxation can help states recover from the recession.