High earners flee California taxes, state revenue tanks

The expected downstream effects of the state's soak-the-wealthy tax schemes are taking effect: 45% decrease from expected revenue gains. The Wall Street Journal reports.

"Stanford economists Joshua Rauh and Ryan Shyu analyzed how high earners responded to a 2012 referendum (prop. 30) backed by Democrats that raised the top marginal rate on taxpayers with more than $1m of income to 13.3% from 10.3%. The top rates on individuals earnings more than $250,000 also rose between one and two percentage points. 

"First, the researchers examined whether higher taxes caused top earners to leave the state by measuring migration before and after Prop. 30 took effect.  They noticed a large uptick in the departure rate of taxpayers with more than $5m in income following the  tax hike--from 1.5% to 2.125%--and a commensurate outflow for taxpayers earnings between $2m and $5m.

"This essentially means that the likelihood of a wealthy resident moving out of California increased by about 40% after Prop. 30.

"Next, the economists examined how incomes changed in response to the tax hike by comparing filings from in-state high earners to non-residents. They found that 'California top-earners on average report $522,000 less in taxable income than their counterfactuals in 2012, $357,00 less in 2013, and $599,000 less in 2014.'

"In sum, the study estimates that outward migration and taxpayer behavior responses erased 45.2% of the expected revenue gains from the tax hike on top earners."

This article originally appeared in the Wall Street Journal. Read the whole thing here (behind paywall).

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