The Myth of Millionaire Tax Flight: How Place Still Matters for the Rich by Cristobal Young (review)

In his 1926 story, The Rich Boy, F. Scott Fitzgerald memorably observed, "Let me tell you about the very rich. They are different from you and me." And according to The Myth of Millionaire Migration by Cristobal Young, the rich are different, though in somewhat unexpected ways. Young sets out to understand whether place matters for the very wealthy. Are today's rich "mobile millionaires" or "embedded elites?" After all, in an age of globalization, the very wealthy could seemingly live wherever they want. This view of an untethered economic elite has long motivated a common-sense political rhetoric among conservatives and liberals alike that the rich will move to avoid taxes. This rhetoric is often found among conservatives who argue taxes on the rich should be kept as low as possible to prevent capital flight and attract new businesses. However, drawing on a variety of data sources, including access to restricted IRS tax data for all million-dollar income earners in every state over a thirteen-year period, Young emphatically shows this claim to be false.

One of the most valuable contributions of the book is, in contrast to political claims that the rich flee places with high taxes, Young demonstrates that taxes are basically irrelevant to the movement of millionaires. Millionaires do not congregate in low tax states nor do they tend to move to low tax states. Indeed, millionaires tend not to move much at all. Among millionaires who do move, there is some evidence to suggest they do so for tax-related reasons; however this number is small (about 15 percent) and is eclipsed by the number of mobile millionaires who relocate to states with equal or higher tax rates. The notable exception, Young notes, is Florida which is a magnate for millionaires (p. 26) and billionaires (p. 34). The state's tropical climate explains a lot of inmigration, yet Young concludes, some of the millionaire migration to Florida, which has no state income tax, is tax motivated. Thus, millionaire migration due to taxes does happen, but it only occurs "at the margins of social and economic significance" Young explains (p. 98).

Outside Florida, however, the very wealthy generally do not move much. The rich, in this regard, are different than the general population primarily for demographic reasons. The very rich are more likely to possess qualities which discourage mobility, such as owning a business or being married or having children (p. 35). Income and career success also ties people to places. Drawing on the Forbes list of the world's billionaires, Young shows that the movement of the very rich often occurs prior to career success. Achieving success in a place makes it harder to leave (p. 13). This is true both of individuals and businesses who rarely relocate their headquarters after the business is founded (p. 108). In other words, place becomes a form of capital that yields returns and confers greater advantages over time.

Further, most millionaires, Young explains, are the working rich, such as those in finance, tech, and business, as well as doctors and lawyers (p. 36–37). These careers, Young argues, are geographically "sticky" (p. 46). The skills that net millionaires their wealth are most valued in specific places. Thus, in addition to demographic characteristics, the careers which generate million-dollar incomes also tie people to certain places. True, the rich can move their wealth overseas and hide it in tax havens. And this certainly happens. But even here, Young claims, tax havens are not sheltering as much wealth as we tend to imagine and their primary appeal may be more for privacy or other reasons (p. 62).

Young concludes by suggesting millionaire taxes can act as a form of intergenerational wealth transfer to support the continued vitality of places, similar to the way professional families engage in concerted cultivation...