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Another Report Debunks Tax Flight Myth

MONTPELIER— A new report, this one by the Center on Budget and Policy Priorities in Washington, D.C., provides more evidence to refute the claim that wealthy residents will move if they are asked to pay higher taxes.

Warnings about tax flight are often used to oppose tax increases. Governor Douglas made the claim to fight additional taxes during the recent recession, and his successor has made the same claim.

“This claim is false,” said Robert Tannenwald, co-author of the report and senior fellow at the Center, a nonpartisan, nonprofit policy research organization. “The effects of taxes on migration are, at most, small—so small that states that raise income taxes on the wealthiest households will see a substantial net gain in revenue.”

Citing IRS data, the Vermont Blue Ribbon Tax Structure Commission challenged the tax-flight myth in its report to the Legislature earlier this year. Noting that people migrating to Vermont consistently have higher incomes than those who move out of the state each year, the commission said migration had resulted in a net gain in income for Vermont for at least the last 16 years.

The report released today by the Center on Budget and Policy Priorities cites numerous examples of research debunking the migration myth and, through case studies, shows how misinformation about the impact of taxes on migration can influence policymakers and the media. Those who support the migration myth often wrongly assume a cause and effect relationship, promote irrelevant findings, and inaccurately measure migration, the report found.

“As we focus on growing our economy and creating new jobs, it’s now crystal clear that we don’t need to be concerned about residents fleeing Vermont if we take a balanced approach that includes new revenues,” said Paul Cillo, president of the Public Assets Institute. “False claims like this shouldn’t deter our policymakers from making good choices for Vermont.”

Very few Americans move between states, according to the report. The little interstate-migration that does occur is more frequently due to job opportunities and housing prices than tax rates. Specifically, the report illustrates that housing costs may have a significantly larger impact on Americans’ finances than tax levels.

“It’s more important than ever that we invest in our state’s future, and that’s why it’s so dangerous to rely on flawed information about the effect of taxes on residents’ decisions about where to live,” Cillo said.  “As the Legislature prepares to address another budget gap for fiscal 2013, we need to make sure we have adequate revenue to support strong schools and the infrastructure we need help our economy grow.”

Jeffrey Thompson, an economist at the Political Economy Research Institute at the University of Massachusetts, published a paper last spring that found that people’s decisions to move were much more strongly correlated with job opportunities and affordable housing than they were with higher taxes.

Cristobal Young of Stanford University and Charles Varner of Princeton University published a study in June showing that a “millionaire’s tax” in New Jersey had little discernible effect on population movement. The New Jersey study also showed that any revenue lost because a few people left was more than offset by the new revenue generated by higher taxes on the vast majority of millionaires who remained.

The Center’s full report can be found at:



Public Assets Institute is a non-profit, non-partisan organization that researches and analyzes state fiscal policy. It is a member of the State Fiscal Analysis Initiative (SFAI) coordinated by the Center on Budget and Policy Priorities in Washington, D.C. Jeffrey Thompson is a research economist based at the Political Economy Research Institute at the University of Massachusetts and funded, in part, by Public Assets Institute and the other New England members of the SFAI network.


For more information contact:

• Paul Cillo or Jack Hoffman, Public Assets Institute, 802-223-6677,,

• Shannon Spillane, Center on Budget and Policy Priorities, 202-408-1080 or

ATTENTION TV PRODUCERS: High-resolution video sound bites featuring the report’s co-author, Jon Shure, are available upon request.  Please contact: Shannon Spillane, Center on Budget and Policy Priorities, 202-408-1080 or