Millionaire Migration in California: Administrative Data for Three Waves of Tax Reform

Does taxing the rich lead to migration of top income earners? In principle, barriers to migration
for the wealthy are low, suggesting that even small changes to top tax rates might set off tax
flight. Since top earners are also the largest taxpayers, the potential flight of the rich can set off a
race to the bottom, as states compete to attract (or retain) the rich with ever lower tax rates. We
draw on big administrative data covering 25 years of all top tax filers in California, showing
movement into and out of the state. We examine three waves of tax reform affecting top earners:
two “millionaire taxes” passed by voters via the proposition system in 2004 and 2012, and a tax
cut passed by legislation in 1996. We emphasize non-parametric, graphical analyses that reveal
the evidence with as few assumptions as possible and analogous regression models that confirm
the non-parametric results. Both in absolute terms, and compared to sensible control groups, we
find little migration response to changes in top tax rates.