Local economists have expressed concern over California’s high income tax rate for wealthy taxpayers. The concern is that these taxpayers will flee the state for tax havens like Florida or Nevada, taking their tax revenue with them. If tax flight occurs on a large scale, this will ultimately harm California’s economic recovery.
Most readers agree that this is a valid concern. However, we beg to differ.
Studies show that more people move by far for reasons like jobs, as well as cultural and geographical amenities (of which California has an abundance) than tax rates.
Consider Florida, which has a comparably pleasant living climate but no income tax. Ever since a large number of jobs were lost in Florida during the recession, the population has only decreased and plateaued. In contrast, California (with its high income tax) has experienced an average 1% population growth each year during this recovery.
Thus, income tax rates have a negligible effect on population movements.
Take it from us: don’t worry about wealthy tax flight!