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

by Cristobal Young

In this age of globalization, many countries and U.S. states are worried about the tax flight of the rich. As income inequality grows and U.S. states consider raising taxes on their wealthiest residents, there is a very real concern that these high rollers will board their private jets and fly away, taking their wealth with them. Many assume that the importance of location to a person's success is at an all-time low. Cristobal Young, however, makes the surprising argument that location is very important to the world's richest people. Frequently, he says, place has a great deal to do with how they make their millions. In The Myth of Millionaire Tax Flight , Young examines a trove of data on millionaires and billionaires—confidential tax returns, Forbes lists, and census records—and distills down surprising insights. While economic elites have the resources and capacity to flee high-tax places, their actual migration is surprisingly limited. For the rich, ongoing economic potential is tied to the place where they become successful—often where they are powerful insiders—and that success ultimately diminishes both the incentive and desire to migrate. This important book debunks a powerful idea that has driven fiscal policy for years, and in doing so it clears the way for a new era. Millionaire taxes, Young argues, could give states the funds to pay for infrastructure, entitlements, and other social programs to attract a group of people who are much more mobile—the younger generation.

Genres: Nonfiction, Politics, Economics, Finance

160 pages, Paperback

Published October 31, 2017

Reviews

[Justin Goodman · Rating 2 out of 5]

I originally read this because I had to scratch an itch, and I ended up semi-satisfied. I'm taking Young's data at face value since I don't have the time or expertise to really gauge whether it's the ideal measurement for wealth and tax flight. I'll say the assortment of tax return info (for millionaires), Forbes list (for Billionaire migration), and "natural experiments" are convincing enough that I don't have much to say for the first two chapters.

The third chapter is broadly about sourcing and questions of tax migration, but geared towards the issue of shell companies in tax havens (with explicit reference to the Panama Papers). One of the more interesting arguments here, and decently convincing, is that offshore accounts seem to be tied more to privacy concerns than wealth: "Desire for secrecy is most tellingly shown by the high rate of tax haven use by residents of Middle Eastern Countries that have no income tax." His primary source for this data is Gabriel Zucman's The Hidden Wealth of Nations .

If the rest of the book had been like the section titled "sandwiches and software," I'd have given this book a higher score. In it, Young uses the concrete and quippy examples of how many big macs McDonald's employee can afford in various locations across the globe and the income boost of an Indian software developer who does nothing more than move to the US in order to argue that place (ergo social capital) is fundamental to wealth. Thus millionaire's have practical, non-statistical, human reasons to not flee taxes since that wealth is tied to place.

The lack of mention for the historical and social forces that created these conditions and how those might affect future choices by millionaires is telling though. Zucman's book has a foreword from Thomas Piketty, and Young references Piketty early on in The Myth of Millionaire Tax Flight. I mention this because these three seem to be as far as Capitalist "Anti-Capitalism" can go. It never considers capital beyond wealth, never considers the historical and sociopolitical forces behind it, the lived stuff, and so they sound like forensics experts speaking through the muffled cloth of a Rawlsian "veil of ignorance" (which Young mentions several times)

This comes out in certain absences - referencing the "cultural fit" element of cultural capital his example of bias isn't racism (what would he say of black wall street?) but an American lawyer unable to get a job as a barrister because he had an accent. This also comes out in phrasing - a constant slathering on of the talent and hard-work of millionaires/billionaires (no mention of monopoly practices and little directly about the government as the tail of the wealthy's dog) and language of "fitting" applied to class, which implies that wealth will come to those who find "their place."

Then, in a random and undeveloped call out, he accuses "many scholars on the left," citing Leslie Sklair's The Transnational Capitalist Class ) of believing "the rich have grown indifferent to nationhood." I have not read Sklair's book yet, but this immediately struck me as off; from my understanding the "left" doesn't generally talk about "the rich," nor generally focus on their relationship to "nationhood."

I found this prebook essay by Sklair on the TCC, as well as this 2016 interview. From what I can tell, the TCC, in Sklair's lens, is meant to explain 1) the conversion of all aspects of life into competitive businesses (that infamous NYTimes oped that more or less says "Shakespeare wrote King Lear during a plague, what are you doing now") and 2) the shift from the predominance of the state as the frame of reference to the predominance of the world (think how small cities like New Haven are "joining" the Paris Climate Accord, or everyone recognizing the Sydney Opera House without ever visiting Sydney). The TCC themselves are defined by their interest in preserving this role to maintaining power for various, complicated reasons. Young is just a step left of neoliberalism. Better than nothing, I guess.

TL;DR: Young's book is maybe useful for progressive politics based in the US, but beyond the data existing in book form there's a lack of breadth, a lack of imagination, that makes him look like an ant who developed a air of gravity because he stumbled on a lost magnifying glass. Probably best fit for a think tank's reference section.

[demi lawrence · Rating 5 out of 5]

read this now so that by Thanksgiving you can piss off your dumb conservative family members ✨with facts✨

[Pradhyum R · Rating 2 out of 5]

It's a well-researched and short refutation of the idea that income tax is related to millionaires' motion. That's literally it though. The future policy is a bit underdeveloped: Young's analysis on how income tax rates affect millionaire motion doesn't result in a reasonable tax level and doesn't provide steps for a policymaker on how to really implement an efficient millionaire tax other than just increasing the millionaire tax rate.

I mean, I'd say Young's summaries in newspapers are probably a better source to understand his data, but his book does have some interesting ideas, like a millionaire tax as a intergenerational transfer like Social Security. Overall though, I'm not sure whether it's really worth the time it takes to read.

[Viral · Rating 3 out of 5]

I read this book because I heard about it from a social media post talking about how despite the constant media fearmongering, increasing taxes on the wealthy won't actually cause them to leave. This book does a really effective deep dive into challenging that mythos, specifically with regards to income taxes. Young has done a lot of in-depth research into tax returns and demonstrates very effectively that higher income taxes, and specifically increasing income taxes, have no significant effect on where millionaires live. This is because many millionaires who generate their wealth from high salaries often need to live near their place of employment, have families/partners that often do not want to move, and social networks that they often rely on for their jobs. Additionally, the biggest cities and states often have other amenities they want to take advantage of that would have to give up just to live in a low tax area. Essentially, moving is a young early professional's game - as you get older, and set roots, you won't really want to move at the period when your income earnings are typically their highest, which means higher income taxes won't necessarily force you to move. Young demonstrates numerous examples of this, again, using official data from the IRS over decades.

Where this book fails, however, is it does not address that many wealthy people derive substantial earnings from asset holdings. These are taxes that are much easier to avoid and make invisible to local governments, without requiring moving and disrupting "place capital". Many corporations do the same - keeping offices in the city, but officially registering the corporation elsewhere to reduce legal tax burden.

I think this book is useful for informing local policy decisions, especially around city/state income tax, but it misses the mark, especially since it lacks a more thorough class analysis.

[Jeffrey]

Informative. Recommended.

[Michael Field · Rating 4 out of 5]

Well researched and concise

[Bj · Rating 5 out of 5]

Required reading for all elected officials. Clear explanations of data analysis, concise explication of additional factors in millionaires' decision-making regarding migration.

[gretereads · Rating 4 out of 5]

read: ch 1 and 2