A study released today finds that when California’s “millionaire’s tax” hiked rates by three points on the richest taxpayers, it chased some of those taxpayers away. About 0.8 percent of the top-bracket tax base left in 2013 (above and beyond the share that leaves in a normal year) — mostly heading to states with no income tax — and the wealthy folks who stayed earned less. The loss of residents and reduced earnings canceled out about 45 percent of the revenue gain the tax hike otherwise would have generated from that top bracket. And the effect may be greater with the new federal tax law in effect.
It’s fortuitous the study happened to come out today, because I have a feeling we’re on the verge of a big discussion about how to tax the rich. Lefty economists Emmanuel Saez and Gabriel Zucman have a book coming out this week called The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay, and the New York Times’ David Leonhardt is already out with a writeup claiming that in 2018, for the first time, the richest 400 Americans paid lower total tax rates (federal, state, and local combined) than any other income group. Various analysts are swarming Leonhardt’s Twitter feed with criticisms and skepticism, too: The data leave out refundable tax credits, thus overstating how hard the tax system is on the poor; Saez and Zucman’s income data, which they’ve used in other projects as well, have come under serious criticism.
I haven’t seen the book, so I’ll hold my fire for now, but with the Democratic candidates in full-on soak-the-rich mode, this could get interesting.