The report comes just two weeks before voters will decide whether to raise taxes on the rich. Conservatives have routinely warned that wealth will leave the state if taxes are increased.
The researchers examined whether California’s 2005 Mental Health Services Tax, which raised the tax rate on income above US$1 million by one percentage point, led to the tax flight of high earners from the state.
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The study started with the question: "Do changes in California’s top income tax rates lead to changes in the migration of top incomes?" to which the researchers found that millionaires showed low responsiveness to the studied tax increases.
"At the most, migration accounts for 1.2% of annual changes to the millionaire population. The remaining 98.8% of changes in California’s millionaire population is due to changes in income levels," the study states.
The study further read, "The highest-income Californians were less likely to leave the state after the millionaire tax was passed. California income tax records provide a virtual census of millionaires, and show when millionaires enter or exit the state. These data offer a unique contribution to the policy discourse on state taxation of top incomes."
The study was conducted by Cristobal Young, assistant professor of sociology, and Charles Varner, doctoral candidate in sociology at Princeton. Both researchers are affiliated with Stanford’s Center on Poverty and Inequality.
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