Did a 2012 California income tax boost chase away high-earning residents?
A 2012 California tax increase on high earners increased the likelihood of a wealthy resident moving from the state by about 40%. A study published last year found that the higher-than-anticipated departures contributed to 45.2% less revenue than expected the first year after the increase, and 60.9% less after two years.
That was a more pronounced reaction than found in earlier studies of so-called "millionaire tax flight." The California increase, approved in a ballot initiative, raised marginal rates to 13.3% for incomes over $1 million.
A study of earlier, more modest state increases found the scale of responses to be insignificant. U.S. tax law changes in 2017 have limited the deductibility of state and local taxes from federal obligations, increasing the impact of higher state tax rates.
