Florida

Rich tend to stay put despite high taxes

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Opponents of higher taxes on the wealthy often invoke the fable about the disastrous killing of the goose that laid the golden eggs. Over-taxing the rich, they argue, will produce the same results metaphorically. The rich will simply move, taking their money with them.

New research, however, indicates that those opposing taxes for the wealthy are playing a bit loosey-goosey with the facts.

The study “Millionaire Migration and Taxation of the Elite: Evidence from Administrative Data,” published in the June issue of the American Sociological Review, finds that most millionaires don’t move from state to state simply to avoid big tax bills.

Millionaires tend to stay put

The study is based on 45 million tax records from U.S. tax filers who earned $1 million or more in any year between 1999 and 2011. Using that data, researchers at Stanford University and economists at the Office of Tax Analysis at the U.S. Department of Treasury discovered that most millionaires aren’t very mobile.

“The most striking finding in our study is how little elites seem willing to move to exploit tax advantages across state lines,” Cristobal Young, an assistant professor of sociology at Stanford and lead author of the study, said in a press release. “Millionaire tax flight is occurring, but only at the margins of significance.”

Young and his fellow researchers found that in any given year, of roughly 500,000 individuals filing tax returns reporting incomes of $1 million or more, only about 12,000 millionaires moved to another state.

The researchers also note that millionaires are no more likely to live in states with low or zero income taxes, like Texas or Florida, than in high income tax states, such as New Jersey or California.

Moving is a hassle even for the rich

The annual millionaire migration rate of 2.4% actually is lower than the migration rate of the 2.9% moving rate of the general population, according to the study. In fact, the researchers found the highest rates of migration among low-income tax filers. Folks making around $10,000 a year move at a 4.5% rate.

“There is a widely held perception that elites are extremely mobile, that they are more attached to money than to place, and with money you can live anywhere you want,” said Young.

While we tend to see moving at will as one of the privileges enjoyed by the rich, such relocation comes with high social and economic costs, said Young. It’s difficult for folks at all income levels to uproot family, break away from social networks and restart in a new place.

Not so different after all

And while the rich definitely are different in many ways from the rest of us working stiffs, work is one thing most of us do share.

Young notes that most millionaires today are the working rich. Rather than living off inherited wealth, they rely on earnings from employment.

“They work as lawyers, doctors, managers and financial executives,” said Young. “They are at the peak of their careers and typically earn million-dollar incomes only for several years. People avoid potentially disruptive moves when they are performing at the very top of their game.”

Limited moves are to low-tax locales

Those opposed to taxing the rich do, however, get one thing right.

The study says that in the limited instances where the rich do relocate, they are more likely to move to a state with a lower tax rate. And the most popular destination for mobile millionaires is Florida.

Of course, that could mean that they like sunny days on the beach as much as they like low taxes. But that’s a topic for additional research.

 

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As one of only seven states with no income tax, Florida presents unique benefits when it comes to preparing your taxes. Florida also has a variety of property tax exemptions that can reduce taxes for qualified taxpayers, as well as special exemptions for senior citizens, veterans, and the disabled. With a thorough understanding of financial trends and Floridian taxation policies, Herman & Company CPA’s, PC provides year-round financial services to residents of Delray Beach— whether you own a business, are tired of navigating social security and pension plans on your own, or simply want to minimize your taxes. We are dedicated to guiding our clients in Delray Beach towards maximizing what they have and minimizing their tax bite, as well as providing year-round financial services.

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Retirement Planning Means Peace of Mind in Boca Raton

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Boca Raton offers beautiful beaches, world-class shopping, amazing restaurants and warm weather all year round, what’s not to love? That’s why, when thousands of Americans retire every year, many move to sunnier climates in Florida to enjoy the relaxation that comes with retirement. In a fluctuating economy, however, retirement planning doesn’t end on your last day of work. The expert team at Herman & Company CPA’s, PC offers unparalleled planning services to make your retirement even easier. For our clients enjoying sun and sand in Boca Raton, Florida, the team at Herman & Company CPA’s, PC provides integral support to ensure the relaxation and peace of mind that you deserve.

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Retirement planning should be easy, but the complicated world of financial policy can cause unnecessary stresses and lost savings. With over thirty years of experience, the team at Herman & Company CPA’s, PC has successfully guided hundreds of clients through annual taxes and wise financial planning decisions, always with the same mission: to provide our clients with personalized support and financial stability. 

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.