Dan Walters

By Dan Walters
July 24, 2016 – 2:02 PM

  • One-percenters pay half of state income taxes
  • Temporary tax hikes didn’t spur mass exodus
  • Would extending them have different effect?

When voters passed Gov. Jerry Brown’s “temporary” tax increase in 2012, they gave California the nation’s highest marginal income tax rates, topping out at 13.3 percent.

It pushed the marginal state and federal rate in the highest bracket to 52.9 percent and would, many thought, lead to an exodus of high-income taxpayers to states with low or no income taxes, such as neighboring Nevada.

There are many anecdotal instances of taxpayers fleeing California – including a few among my own acquaintances – and one very lengthy court battle between California tax authorities and an inventor who fled to Nevada for tax purposes two decades ago.

However, as yet there’s no evidence of massive “tax flight,” as it’s been dubbed.

A lengthy study published in the American Sociological Review, charting movements between high- and low-tax states, found that “millionaire tax flight is occurring, but only at the margins of statistical and socioeconomic significance.”

A study conducted for Controller Betty Yee by Stanford University concluded, “Migration is a very small component of changes in the number of California millionaires.

“While the millionaire population sees a typical year-to-year fluctuation of more than 10,000 people, net migration sees a typical year-to-year fluctuation of 50 to 120 people. At the most, migration accounts for 1.2 percent of the annual changes in the millionaire population. The remaining 98.8 percent of changes in the millionaire population is due to income dynamics at the top – California residents growing into the millionaire bracket, or falling out of it again.”

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