Daily Debunk: Millionaires don't flee taxes

Yet Fair Tax opponents persist in repeating ‘baseless canard’ about ‘tax flight’

The Gillett Mansion in Buffalo outside Springfield was on the market earlier this year, but that doesn’t mean a millionaire was fleeing the state and its taxes. (Flickr/Randy von Liski)

The Gillett Mansion in Buffalo outside Springfield was on the market earlier this year, but that doesn’t mean a millionaire was fleeing the state and its taxes. (Flickr/Randy von Liski)

By Ted Cox

Whenever and wherever people are arguing against the Fair Tax Amendment, you can be sure at some point they’ll raise the issue of “tax flight” and the “Illinois exodus.”

Just a week ago, in an online debate sponsored by the Lincoln Forum and the Union League Club of Chicago, Greg Baise of the Coalition for Jobs, Growth & Prosperity said, “Illinois is losing population. It is losing people who have run businesses here.”

Complaining about the state’s workers’ compensation program, as well as the proposed graduated income tax, Baise said, “It’s only going to increase out-migration.”

This in spite of a Better Government Association study finding that, when the state raised taxes on everyone almost a decade ago, it was the wealthy who stayed put and prospered, while it was low-wage workers bearing the brunt of the state’s regressive flat tax who moved.

Quentin Fulks, executive director of Vote Yes for Fairness, a group lobbying for the progressive income tax, appeared to be thinking of that study and other recent evidence when he countered that “the simple fact is that the individuals who are fleeing the state of Illinois are minorities, and they’re fleeing the state of Illinois because the state of Illinois has failed them, failed to educate their kids properly because we don’t have revenue” sufficient for public schools. “The state of Illinois has failed them to produce jobs and opportunity in the communities where they live, and the state of Illinois will continue to fail them and hamstring them as long as we have this flat-tax system in place.”

Fulks said the state’s admittedly diminishing population was due to “Black flight,” not tax flight, “because of a state that is failing them on all fronts.” He also blamed “a crusade against organized labor in this state,” especially under former Gov. Bruce Rauner.

State Sen. Sue Rezin of Morris tried to have it both ways in arguing against the Fair Tax Amendment, saying that workers are “following jobs. That’s why they’re moving to other states.”

Yet Daniel Biss, the former state senator and governor candidate now running for mayor of Evanston, would have none of it. Pointing to the “ton of data” on other states that have adopted and altered graduated income taxes to tax the wealthy at higher rates, he said, “The states that have enacted tax structures like this one have not seen significant upticks in out-migration. In fact, many of them, for example Minnesota, which enacted a marginal top rate quite a bit higher than this less than a decade ago, they saw an increase in revenue that outpaced their expectations, and they saw unemployment drop and their population go through the roof.”

IMG_2839.jpg

“The states that have enacted tax structures like this one have not seen significant upticks in out-migration.”

Daniel Biss (One Illinois/Ted Cox)

Biss said, “The question is what kind of environment are we creating? Are we solving our problems? Are we providing adequate public services for people and for businesses? And this Fair Tax is a critical step to begin to fix the state’s structural problems, which will make us more attractive not only to the 97 percent of households who will be paying less, but also to everybody else who relies on public services as well, who wants to have infrastructure and education in the place where they’re going to start their business. I think we’ll see an increase in our population and our revenue.”

Earlier last week, the St. Louis Post-Dispatch published an editorial in support of the Fair Tax Amendment, debunking the notion of “tax flight” as a “conservative bugaboo.”

And the very same day the debate took place, the Center for Tax and Budget Accountability gathered together a wealth of materials in a blog post titled “Debunking the Myth That Tax Policy Causes Out-Migration.” The post stated: “Many of those opposed to the Fair Tax have tried to mislead Illinoisans into voting against ratifying the proposed amendment to the state’s constitution this November by relying on arguments that have emotional appeal but are not supported by either evidence or the vast body of research. One such specious argument consistently made against the proposed Fair Tax is that the change to a graduated-rate income-tax structure will cause a mass exodus of middle-income households and millionaires from Illinois.”

Calling that a “baseless canard,” the post went on to cite a compilation of evidence showing “no statistically meaningful relationship between tax policy and migration,” and finding that the “number of millionaires per capita is not correlated with tax policy.” In fact, the center pointed out that Illinois’s population loss recently peaked in 2016 and 2017, while the state was suffering through two years without a budget in an impasse imposed by Rauner in a ill-fated bid to enact a union-busting austerity agenda that crippled social services, especially education. It argued instead that “social capital, education, and income are what matter in choosing a residence — not tax policy.”

The center concluded: “The bottom line is again clear: the actual trends concerning migration into and out of Illinois, as well as the body of research, show there is no statistically meaningful relationship between state income-tax policy and migration.”

End of the debate, at least on that issue.