The Myth of Millionaire Tax Flight
How Place Still Matters for the Rich
Cristobal Young



Millionaire Taxes in a World with Few Borders

We live in a time of both globalization and growing inequality. This dual trend presents a troubling challenge. Places and nations can alleviate inequality, at least in part, by taxing the well-off and investing in education, infrastructure, and public services that make life better for most people. But globalization renders the rich more mobile and less connected to places that might tax them. The potential flight of the rich leaves places, states, and countries wondering about the future.

Many places and nations are concerned about the migration of top taxpayers. Taxes paid by the rich provide revenue for vital public services and help to address the growing inequality in market incomes. However, millionaire migration—the flight of the largest taxpayers—can drain state revenues and set off a race to the bottom as states try to woo the richest with ever-lower tax rates.

The discourse of globalization depicts a world where borders are frequently crossed. Rich, cosmopolitan elites and their capital flow easily across borders; people are less tied to place, less tied to the land, to their nation, and to their local communities. If this characterization is true, it is incredibly important. If a jet-setting millionaire class can easily dodge taxes by moving away, these people can effectively dictate tax policy to states and nations by threatening to leave.

In recent years, eight U.S. states have passed “millionaire taxes”—new income tax brackets with higher rates—on their highest income earners. Yet, some other U.S. states, like Texas and Florida, still have no state income tax at all. Can some states tax the rich while other states do not? Can higher tax states retain their wealthy residents and the tax revenue they bring in?

Many answer this question with a ferocious no. As Oregon residents went to the polls to vote on a proposed millionaire tax in 2010, Oregon’s richest resident—Nike founder and chairman Phil Knight—warned that the tax would set off a “death spiral” in which “thousands of our most successful residents will leave the state.”1 In Maryland, Larry Hogan, a leading critic of the state’s short-lived millionaire tax, insisted in 2012 that “people are simply going to leave, leading to a downward spiral of raising revenues on fewer citizens.”2 Hogan was subsequently elected as the Republican governor of Maryland. In New Jersey, Governor Chris Christie simply declared, “Ladies and gentlemen, if you tax them, they will leave.”3

These views are based on the strength of people’s convictions rather than actual evidence. Until very recently, there has been remarkably little data and analysis on the migration patterns of top income earners. Debates have been driven by anecdotes and instincts. This book is about filling in the vacuum of evidence—drawing on big data to provide compelling answers to a systematic set of questions about the mobility of the rich.

Top income earners—defined here as those making at least $1 million a year—are free to live anywhere in the United States. The very richest of them can likely live anywhere in the world. Indeed, for the rich today, the global map looks increasingly like the United States—a collection of places with no real borders between them, among which an economic elite can freely move and choose where to live.

With the diminishing cost of travel, increasing ease of obtaining international visas, and the rise of online communication, the viability of tax migration seems greater today than ever before. Some see the very richest as making up a “transnational capitalist class”4 that enjoys unrestricted freedom to move across the world through a network of global cities. Will this compel states and countries to compete over lowering tax rates on the rich? Will low-tax states and nations poach the highest income earners from higher tax places? This issue is closely related to questions of how globalization, more generally, is disciplining nations and creating pressure for an international race to the bottom in taxation and social policy.

Neoclassical economists have long seen taxes as a factor that influences where people choose to live.5 Economists, of course, also recognized that taxes pay for public goods—better roads, bridges, parks, and schools—that influence where people want to live. As long as revenues are used to fund public services that matter to residents, there is no reason to think taxes would lead to out-migration. However, in more recent years, some have argued that under highly progressive taxes, the rich contribute much more than they receive in public services. Harvard economist Martin Feldstein has made some of the strongest claims about tax migration among top earners. In a world of free mobility, Feldstein argues, taxes on the rich do not raise revenue or reduce inequality but simply lead to millionaire migration. If states raise taxes on the rich, the top income earners will leave, causing not just a loss of tax revenue but also a shortage of high-skill workers. The market will, in turn, bid up the wages of the remaining high-skill workers, and inequality in the state will return to its equilibrium level. Taxes on the rich, Feldstein argues, fail because of freedom of movement.6 This view has become increasingly prominent in public debates over taxes, especially at the state level.

There are, however, broader sociological reasons to doubt the ready mobility of millionaires. Moving is a young person’s game, but earning income in the top bracket is not. Migration overwhelmingly occurs when people are establishing their careers. People almost never move when they are at the advanced career stage—a time when they are most likely to face a millionaire tax. At the peaks of their careers, people have family responsibilities—spouses and children who may be opposed to moving. They also have a lot of business and social contacts that make them prominent, well-connected insiders where they live. Top income earners, in other words, have often accumulated significant human, social, and cultural capital where they live.

Economic sociologists have long emphasized that economic action, such as income earning, is “embedded in concrete, ongoing systems of social relations.”7 Income is partly based on personal connections to colleagues and clients, experience within a company, local reputation and goodwill, knowledge of one’s competitors, and access to social networks that bring rich information. Moving after achieving high success or at a late career stage can mean giving up a home-field advantage that may not make much business or economic sense.

In the age of globalization, what is the connection between the rich and the places where they live? Is place a temporary convenience for the rich and powerful—readily switched out when the tides change? Or is place a deep foundation for their success? Are top income earners “mobile millionaires” searching for low-tax places to live, or are they “embedded elites” reluctant to move away from the places where they have become highly successful?

These questions are important because they can yield insight into the future of inequality in the United States. One of the biggest socioeconomic questions of our time is whether the United States can build a new era of shared prosperity. Can we make the engine of economic growth something that benefits everyone?

In recent decades, market economies have created a great deal of inequality. This is a story of middle-class wage stagnation, combined with dramatic gains in income at the top. The top 1 percent today capture more than 20 percent of all income created in the U.S. economy. This share has been growing rapidly. Since the early 1990s, roughly half of all income growth in the United States has accrued to the top 1 percent, with the other half going to the rest of the population—the 99 percent.8 Corporate CEO salaries illustrate the extremes of the growing divergence in economic fortunes. Since 1978, real CEO salaries have increased roughly tenfold—from $1.5 million to $16 million per year—while average worker incomes have risen little more than 10 percent.9 This is the rise of a winner-take-all economy, where the benefits of economic growth largely accrue to those at the top.

Rising inequality is not a generic feature of capitalism. In the years following World War II and into the late 1970s, tremendous economic growth was coupled with a declining share of income held by the top 1 percent. This was truly an era in which “a rising tide lifts all boats”—and middle-class boats were rising fastest. But the world—and the nature of economic life—has changed a great deal in the decades that followed. Those changes include the end of the Cold War, the computer revolution, globalization, trade deals, offshoring of jobs, the decline of private sector unions, the growth of Wall Street and financialization of the economy, eroding minimum wages, and the reduction of taxes on top incomes. The end result is that Americans are no longer living in an era of broadly shared prosperity.

It is easy to be pessimistic about our economic future. Thomas Piketty, in his book Capital in the Twenty-First Century, argues that the post-war era of economic growth and shared prosperity was an anomaly and that the future will entail a steadily rising concentration of wealth and power in society.10 The rate of return on capital in the foreseeable future, Piketty argues, will be higher than the overall rate of economic growth. This means the rich—or, at least the owners of capital and their investment managers and advisors—will be getting richer at a faster rate than the rest of society and will be claiming a growing share of the overall dividends of a productive society.

Piketty calls for a global tax on wealth—although he himself presents it as a hypothetical ideal. We could think of the proposal as calling for a “World Tax Organization,” operating alongside the World Trade Organization.11 But there is no obvious pathway to such an international consensus. One problem is that the countries of the world—and even states within the United States—do not agree on what the top tax rate should be, and many places want different tax policies. In a time of globalization—and in a world with digital finance, shell companies, and easy mobility—tax flight and the migration of the elite are prominent concerns for policymakers. If some places have very low taxes, can other places sustain different policies that ask more of the top income earners?

Varieties of Taxation

Over the last several decades, U.S. national tax policy has shifted away from the taxation of the rich, sharply reducing tax rates on top incomes, capital gains, and multimillion-dollar inheritances. The U.S. anti-tax political movement has largely been a campaign to “untax the one percent.”12 Since 1970, total federal taxes on the general population are basically unchanged at about 23 percent of total income. But for the richest, federal taxes have fallen by half, from 70 percent to 35 percent.13 This has been referred to as “trickle down” economics—the belief that if the rich are taxed less, the economy will grow and generate jobs and economic gains for everyone. But the economy has not grown well.

The combination of declining federal taxes on the rich and rising incomes at the top has tempted a number of U.S. states to adopt so-called millionaire taxes on top incomes. States have been, in essence, going where the money is to find new revenues at the top of the income distribution. Since the early 2000s, states including New Jersey, California, Maryland, New York, Wisconsin, Oregon, and Connecticut have adopted additional tax brackets for the very highest income earners. Several other states, including Washington and Illinois, have tried to pass such taxes and failed. A central question, in all of these political campaigns, has been whether these blue state policies show leadership in addressing inequality—by drafting a new social contract with the rich—or whether the rich will simply migrate to red states that offer lower tax rates.

There are growing signs that the elites themselves are troubled by rising inequality and may be more tolerant of higher taxes than the current political discourse suggests. Some of the richest people in America—Bill Gates and Warren Buffett—have led a campaign for the Giving Pledge, calling on fellow billionaires to give away at least half their wealth to charitable causes. Many have signed on. As Buffett has said, “If you’re in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.”14 Buffett also offered a longer justification for the Giving Pledge, rooted in the idiosyncrasy of market income:

I’ve worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions.15

This comes from the spirit of noblesse oblige—a feeling among those at the top that they have not only amassed a great fortune but have also been very fortunate.

What about the less elite millionaires like top doctors, lawyers, and business managers? Do they feel a similar sense of obligation that comes with their more modest fortunes? Concern about inequality often comes from a more personal place for higher-end income earners: parental responsibility and concern about how their children will fare in a winner-take-all society. Sociologist Marianne Cooper spent years interviewing rich and poor families in Silicon Valley.16 Poor families, she found, rarely talked to her about the macro-economy or trends in inequality; they were focused on making ends meet week to week. But high-income families were keenly aware of growing economic polarization. This drove an intense concern about their children, a fear that as parents they were not doing enough to prepare them for an increasingly unequal world and a worry that they had not yet saved enough to pay for their kids’ master’s degrees. High-income families saw a world split between the haves and the have-nots as an existential concern for their children, and this framed much of their own self-doubts as parents. This is an intergenerational Rawlsian “veil of ignorance”: The successful worry about inequality because they do not know where their children will end up in the economic world of tomorrow.

Is this enough for top income earners to see progressive taxation as legitimate? In some ways, inequality may push people at the top to even more preciously guard their income. The top 1 percent may well alternate between feeling some noblesse oblige on one hand, yet also feeling some resentment that taxes are getting in the way of their responsibility to their children. While people at the top may genuinely wish the country was less economically polarized, they also know there is an arms race at play.

So, politically, there is room for appeals to the nobler instincts of top income earners. Following Warren Buffett’s lead, the Patriotic Millionaires activist group has been cajoling their fellow rich to accept greater tax responsibility. The Patriotic Millionaires say they reject the idea that

only a very small group of highly talented elites is responsible for creating the wealth. . . . We [millionaires] have been the biggest beneficiaries of this system called America, and we should pay more to keep it running. We have reaped the greatest share of the benefits. We should contribute the largest portion of the investment.17

In 2011, a survey of millionaire investors by the investment group Spectrem found that a sizable majority (67 percent) supported higher taxes on millionaires.18

Nevertheless, many of the rich are fiercely opposed to higher taxes. A political movement led by activist Grover Norquist has made low income tax rates perhaps the deepest and most profound commitment held by the Republican Party.19 Some political and social scientists have suggested that, in the modern era, millionaire taxes may be simply too contentious and polarizing to be viable tax policy and that future revenue needs should probably be met with sales taxes.20 But these questions are ultimately normative: Which kind of tax system is genuinely seen as fairer and closer to the moral beliefs of most Americans? Millionaire taxes can be seen as penalizing the hardest-working and most productive members of society, and thus as an affront to American work ethic values. On the other hand, millionaire taxes can been seen as calling for the largest tax contributions from those who benefit the most from American capitalism and from the protections and rights of the U.S. Constitution. However, in many political debates today, these crucial conversations about fairness and moral values are often sidestepped. Economists like Martin Feldstein and his political proponents argue, in essence, that the morality or fairness of the tax code is irrelevant: Millionaire taxes are simply self-defeating because the rich will leave.

If millionaires are voting with their feet—and moving to the tax systems that they want—what kinds of tax plans can survive this pressure? If there is a great deal of millionaire tax migration, perhaps questions of fairness really are just idle discussions of unworkable aspirations.

This raises the central question of this book. Can different places sustain different tax rates on the rich? Texas will never want to be a state that taxes millionaires at a higher rate. Internationally, some countries are deeply committed to tax systems with low rates on the rich. If a “global tax on wealth”—as Thomas Piketty advocates—is impossible, how much room is left for national policymaking and varieties of elite taxation?

This book takes on some broad intellectual territory. It might be seen as the demography of the rich—the migration of millionaires and billionaires—with a focus on the geographic limits and possibilities of taxation. But deep at the center of this inquiry is the importance of place in the modern world. I argue that place remains centrally important to the lives and incomes of the rich in the United States and abroad. Globalization and migration have been misunderstood for many years. And this has important implications for how we think about taxation and geographic mobility.

Sociologist Saskia Sassen writes that globalization is not just a process of global dispersion, but also one of spatial concentration. Globalization is seen in offshoring factories and jobs around the world, building global networks of franchises and subsidiaries, and the rise of international financial markets to facilitate worldwide investment and payments. But alongside this has been a corresponding growth of “headquarter work”: the coordination and management of these increasingly complex businesses. The “top-level financial, legal, accounting, managerial, executive and planning functions,” Sassen notes, have not been globalized but are actually more geographically concentrated.21 Global production systems are managed by elite workers in New York, Chicago, and Los Angeles, and internationally, in London, Paris, and Hong Kong. The corporate services complex—made up of the top firms in law, accounting, management consulting, and investment banking—is overwhelmingly concentrated in the major cities of wealthy countries. Globalization has not meant that elite professionals and the executive class can now live wherever they wish. On the contrary, place is more important than ever, and top income earners are more and more concentrated in major cities like New York.

While domestic and international travel have increased dramatically in this latest era of globalization, actual migration—moving one’s home and life to a different place—has changed very little, especially for people born in the rich countries of the OECD (Organisation for Economic Cooperation and Development). Understanding how place still matters in a globalized world is important not just for the design of tax policy, and not just for millionaires, but for how we all understand our lives and the ties that bind us to where we live.

Data and Methods

How does one study the geographic mobility patterns of the highest income earners? My initial entry point into this research area was in studying the effect of a so-called millionaire tax passed in New Jersey in 2004. This policy raised the marginal tax rate on incomes above $500,000 by 2.6 percentage points. There were widespread criticisms, however, that the tax was causing rich New Jerseyans to leave the state. To study the effects of this tax, the New Jersey Division of Taxation granted me and my colleagues unique access to the complete NJ-1040 tax records for the years 2000 to 2007.22 This provided a virtual census of high income earners, with information on income, taxes paid, and whether a tax filer entered or exited the state.

These administrative tax data solved a central problem in the study of economic elites: the difficulty of acquiring good data on them. Millionaires tend to be protective of their privacy and reluctant to participate in interviews or surveys. By definition, elites are few in number and hard to find using conventional random-sample survey methods. The U.S. Census Bureau—which has very big data on the population—“topcodes” income data so that the highest earners cannot be analyzed for confidentiality reasons. All of this means that most of what is known about millionaires is largely anecdotal and speculation. The New Jersey tax data allowed us to conduct the first study using actual migration data for the very highest income earners.23

For this book, I drew on special access to the tax returns of every million-dollar income earner in every U.S. state over thirteen years. This information includes 45 million tax records from anyone who ever filed a tax return with annual income of at least $1 million between the years 1999 and 2011. Access to these data is provided through collaboration with researchers at the Office for Tax Analysis at the U.S. Department of the Treasury.24 These big administrative data provide, in essence, a census of top income earners in the United States, with data on how much they make, where they live, and where they move. This is an extraordinary database from which to probe central questions about the mobility of the rich.

The term “millionaire” often refers to individuals with high net worth: those with $1 million or more in financial assets. The focus here is even more exclusive: This is primarily a study of people who can make that amount in a single year. I focus on income earners rather than net wealth because income is subject to taxation in the United States whereas wealth per se is generally not. Thus, “millionaires” in this study—those making at least $1 million in annual income—are more elite than the 1 percent. They represent roughly the top 0.3 percent of people in the income distribution. As a group, their median income is $1.7 million. Some—about 4 percent of the group—make at least $10 million per year.

I also examine international data on people with extremely high net worth—those on the Forbes list of the world’s billionaires. Admittedly, this is a shift from big data to small data: Only about 1,000 people appear on the Forbes list in 2010, the year on which I focus. The Americans on this list are all likely included in the millionaire set I draw from IRS tax returns. But those on the Forbes list can be identified by name, and they make an interesting subset of people who have high annual income, as well as the greatest amounts of accumulated wealth. More importantly, the Forbes billionaire data allow me to look at the international migration of the richest in the world—the propensity of economic elites from any country to move to lower-tax countries. This gives us multiple angles on the mobility of the super-rich: all high income earners in the United States, the 400 Americans with the most extreme wealth, and the 1,000 richest people worldwide.

Finally, I delve into the world of global finance and international tax havens. If the rich can readily hide their money in offshore accounts, this could provide an alternative to tax-motivated migration. Rather than moving to avoid taxes, perhaps they can simply move their money. The Panama Papers leak showed the use of anonymous shell companies to conceal the identity of powerful and wealthy people around the world. I examine how the offshore economy works, how much financial wealth is hidden offshore, and roughly how much tax evasion is occurring through these accounts. This examination complements the core analysis of the mobility of millionaires with a look at the movement of their money.

The central argument of this book unfolds in three chapters. In Chapter 2 I present comprehensive evidence on millionaire migration within the United States. I draw on 45 million tax records from every million-dollar income earner in every U.S. state over thirteen years, tracking the place from which millionaires file their taxes. I present a series of tests of whether top earners are better seen as “mobile millionaires” or “embedded elites.” This provides a demographic analysis of the rich in America. I analyze how often millionaires migrate and how often they move to lower-tax states. I also examine—along states’ narrow border regions and in cities that cross state lines—whether millionaires cluster on the lower tax side of the border. The chapter also draws on the Forbes 400 list of richest Americans, to explore whether the super-rich are drawn to low-tax states. I supplement this with U.S. Census data to reveal striking patterns in migration by age and education over the life course.

Chapter 3 then zooms out to the global landscape. At the global level, millionaire tax flight could mean the movement of top earners and their families, or it could mean simply the movement of money through shell companies and foreign bank accounts. This chapter explores both possibilities. In terms of global mobility, how many of the world’s billionaires live outside their country of birth? How many reside in the world’s well-known tax havens? The chapter builds on the numbers and the life trajectories of the world’s billionaires to understand what drives the global migration of the super-rich. Moreover, the international tax game is not just about the migration of people. I explore new research on the enormous sums of money held in offshore tax havens, an issue highlighted in leaks from the Panama Papers. The offshoring of money is, to some degree, a substitute for offshoring one’s life. I examine the extent to which elites can use offshore accounts to evade taxes and whether a careful structuring of shell companies can be a substitute for actually moving to an offshore tax haven. As it turns out, offshoring personal financial wealth accomplishes less tax evasion than one might think.

Chapter 4 takes a step back to reflect more deeply on millionaire migration and why it is not more common in the modern world. This chapter is about understanding why place is important and why mobility—especially for those at the top—is less appealing than we often think. I emphasize that human capital—knowledge, skills, and abilities—tends to be place-specific. For example, top-level financial analysts have place-specific human capital. Their skills will be most valued in a handful of major cities that specialize in finance, which limits where they can live. Similarly, social capital depends on living in the place where people have their best social contacts and connections. And cultural capital means taking advantage of opportunities where people have their strongest cultural fit. The place-specific nature of these forms of capital grows over time, especially as people advance in their careers. By the time people reach the peak of their careers—and enter the top tax brackets of their states and countries—many have become embedded elites. Even if the world’s borders are open to them, their economic advantages are strongest in the places where they built their careers. Moving at one’s peak career stage is rare because so much human, social, and cultural capital has already been vested in one’s location. Places are sticky: When you achieve success in a place, it becomes harder to leave.

I conclude the fourth chapter on a broad note about globalization and the nation-state. It is tempting to think that without legal borders and citizenship rules, populations would readily spill across borders. But, at least among people born in rich countries, national borders are much less important than we think. Countries are held together mostly by the gravity of home-field advantage and place-specific capital. If the countries of the Western world dissolved their shared borders, it is unlikely that many people would move. What borders mostly do, we will see, is keep people out—specifically people born in the global South: These are the developing countries in Asia, Africa, and Latin America, and people from these regions would have a much higher standard of living if they could work in a rich Western country. For people born in rich countries, no such opportunity differentials motivate systematic migration, and plenty of place-specific capital deters it. Among rich countries themselves, few citizens have much reason to live elsewhere—even if the legal borders were completely open.

In the final chapter, I focus on the policy implications emerging from this research on millionaire migration and the taxation of the rich. What should be the policy priorities of places that seek to address inequality and build a foundation for shared prosperity without setting off the migration of top income earners? The threat of millionaire migration does limit the ability of states to set higher tax rates for the rich but by less than one might think. I suggest a modest agenda for addressing individual tax evasion through offshore shell companies. And finally, I conclude by suggesting that it may be better for places to compete for young, highly educated individuals who are just beginning their careers, rather than trying to attract the late-career individuals who currently have the highest incomes.

Now, let’s start exploring the evidence and see what mobility looks like for millionaires in the United States.


1. Knight (2010).

2. Frank (2012).

3. Office of the Governor (2010).

4. See Sklair (2001).

5. See the classic works by Charles Tiebout (1956) and Richard Musgrave (1959).

6. Feldstein and Wrobel (1998).

7. Granovetter (1985), p. 487.

8. Saez (2016).

9. Mishel and Davis (2015).

10. Piketty (2014).

11. Noted international tax expert Reuven Avi-Yonah suggested this language back in 2001. See

12. Martin (2013); for further analysis of elite influence on public policy, see Gilens (2012), Gilens and Page (2014), and Bartels, Page, and Seawright (2013).

13. These figures are from Piketty and Saez (2007), Table 2, p. 13. The figures are for 1970 to 2004 (the latest year they report on); if updated to 2016, there would be little real change. The figures represent average, rather than marginal, tax rates and include all taxes applied by the federal government, including the individual income tax, payroll tax, corporate tax, and the estate tax.

14. Andersen (2013).

15. Buffett (2010).

16. Cooper (2014).

17. Payne (n.d.), pp. 34 and 46.

18. Frank (2011).

19. Martin (2013).

20. Prasad (2012); Martin and Prasad (2014); Scheve and Stasavage (2016).

21. Sassen (2007), p. 65.

22. An initial look at these data is in Young, Varner, and Massey (2008). The comprehensive analysis of millionaire migration in New Jersey is reported in Young and Varner (2011).

23. Young and Varner (2011).

24. The first report of research from this collaboration was published in Young et al. (2016). I drew on and extended these analyses in this book.