Michael Hiltzik: There's still no evidence that taxes are driving residents out of California

Michael Hiltzik, Los Angeles Times on

Published in Business News

There's no secret about why governors and state legislatures obsess over statistics on interstate migration.

But there are more substantial reasons, too. Population changes point to economic strengths and weaknesses, at least indirectly. The loss or gain of a single mega-plutocrat can threaten to make a material difference in a state's tax receipts. The flow of population into and out of states endows the winners with bragging rights and shrouds the losers with an aura of shame.

In 2016, the relocation of billionaire hedge fund manager David Tepper from New Jersey to Florida prompted the former state's officials to fret about the potential loss of hundreds of millions of dollars in taxes. New Jersey had a top personal income tax rate of 8.97%; Florida has no income tax.

All this helps to explain the thirst for evidence of how the tax bill of December 2017, passed by a Republican Congress and signed by President Trump, could affect state and local budgets.

The most important provision of the bill, from the standpoint of state and local officials, is a $10,000 cap on deductions for state and local taxes, known as the SALT cap. The provision effectively raises the burden of state taxes on high-income taxpayers.

Anti-tax conservatives are optimistic that the cap could work as a political constraint on efforts to hike state tax rates on those in the "millionaire and billionaire" brackets.


The Wall Street Journal, for example, cited California's "tax-the-rich boomerang" last October in trumpeting a Stanford University study finding a net outflow of wealthy taxpayers from the state after a 2012 tax hike. The Journal implied that the outflow was torrential; in fact, the actual figures showed that the migration was a trickle.

Ever since the SALT cap went into effect in 2018, the hunt has been on for signs that it has prompted more wealthy residents to move from high-tax to low-tax states.

"Despite some recent claims that it has," Lucy Dadayan of the Tax Policy Center wrote on Feb. 10, "the data available support the view that 'We don't have any idea.'"

News articles crop up from time to time about things like surging purchaser interest in Florida condos from residents from New York or California. But they're anecdotal, not data-driven. It's hard to say whether the interest doesn't reflect the pretax bill trend or bargains left over from a lengthy Florida real estate slump.


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