Tags: Rich | Move | State | Taxes

Rich Won't Move Even if State Raises Income Taxes: Report

By    |   Monday, 26 March 2012 12:38 PM

States can let out a loud sigh of relief. Apparently there's no need to worry that tax increases targeted at high-income households will make them run for the hills. So says research from economist Jeffrey Thompson of the Political Economy Research Institute at the University of Massachusetts in Amherst, in his paper Raising Revenue From High-Income Households.

State and local tax systems are regressive, placing higher tax rates on low-income households than on high-income households.

When the Great Recession took its toll on state coffers, some took a second look at a tax system that placed the least burden on the richest households. As a result, a number of states put in place new taxes on affluent households.

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There was a fear, however, that doing so might cause affluent households to decrease their work effort, to decide against investing or starting a new business, to move to another state, or to shield their income from taxes through shelters, writes Thompson.

But the research he reviewed suggests that modest tax increases on affluent households have no such ramifications.

“The rich will not go on strike. They will not cease working, stop investing, or even move,” writes Thompson.

This is good news for sure. According to the Center on Budget and Policy Priorities, state budget estimates for the upcoming fiscal year show that states still face a long and uncertain recovery. For fiscal year 2013, the fiscal year that begins July 1, 2012, 30 states have projected or have addressed shortfalls totaling $49 billion. They're going to need all the help they can get.

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Monday, 26 March 2012 12:38 PM
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