Where Have All the Millionaires Gone?

July 15, 2010 at 9:54 am

Several states, including Maryland and New Jersey, have reported a decline in their millionaire population in the past couple of years, and advocates for cutting taxes have been quick to argue that this shows high-income residents are fleeing to other states with lower taxes.

But new IRS data call this claim into question, showing that the number of households in the entire country with incomes above $1 million dropped by 18 percent in 2008 (see chart).

No one is suggesting that this decline means millionaires are leaving the United States because their taxes are too high. Instead, the logical explanation is the combination of the stock market collapse and the general economic downturn. The same thing happened close to a decade ago after the bursting of the dot-com bubble and the 2001 recession, as the chart shows.

Those at the top of the income scale derive a large share of their income from investments. When the stock market crashes, their incomes take a big hit — if only temporarily. Incomes at the top took off again shortly after the 2001 recession, for example.

So the next time you hear someone saying a state should cut taxes to keep the wealthy from departing, keep in mind that in difficult economic times like these, most of them are moving down, not out.

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More About Jon Shure

Jon Shure

Jon Shure is Deputy Director of the State Fiscal Project.

Full bio | Blog Archive | Research archive at CBPP.org

2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Robert #

    Millionaires are disappearing? Moving out of the United States? What about all those Millionaires that are created monthly if not weekly after winning PowerBall and MegaMillions State lotteries? They disappearing too? Or don’t they count as they became Millionaires by chance and not by a lifetime of hard work? I would like to see the results of a survey done on this if anyone cares to conduct one.

  2. jonathan #

    I remember reading through the Maryland data when the WSJ printed this and finding that the tax went into effect in May of the year in question (2008?). It also wasn’t passed significantly earlier, so the idea would then have to be that people moved in a matter of a few months, which makes less sense the more you think about it.

    As for NJ, didn’t you guys post about the net revenue effects and the numbers of people moving in and out of NJ? Was that somewhere else? The net revenue loss, as I remember it, was in the low ten million range while the net revenue gain was about $1B.

    In this general regard, I’m often confronted with the “point” that Southern states “do better” economically – which is demonstrably untrue in this recession. My response is that Southern states have had 40+ years since Jim Crow ended and are still net drains on the US Treasury – receiving more back than they send – while entire countries have become much wealthier in the same period, with literally hundreds of millions improving. One can’t use this kind of argument to prove that a higher tax regime is actually better but one can use it to impeach the argument that a lower tax regime is better; it seems to generate worse jobs, more poverty that hasn’t been alleviated despite 4 decades of supposedly better performance. This goes along with the recent discussions about Texas versus California, that lower paying jobs have migrated to Texas while higher paying jobs have migrated to CA.

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