Gov. Haslam said this week that Amazon will receive a special exemption from the state law requiring businesses with a physical presence in the state to collect the sales tax. The decision was made in private negotiations and the terms are not being released to the public. The deal means the state will lose at least $30 million in much-needed revenue at a time when the state budget has already been slashed for public services like TennCare, higher education, and pre-K programs.
The deal also means that small businesses, representing 95% of Tennessee employers, will be hurt even further in the midst of an ongoing national recession. Small businesses are required to collect the state sales tax (the highest in the nation), and already lose business to online and out-of-state competitors who have lower (or no) tax rates. Now the state has handed our small business's biggest opponent, online retail giant Amazon, another competitive advantage.
Haslam has said the 1,200 jobs Amazon says it will create are worth the $30 million in lost revenue. Those 1,200 employees would have to generate $25,000 each back into the economy every year to make up for the revenue, and it's questionable that employees at a warehouse will be paid sufficiently to do that.
Lt. Gov. Ron Ramsey even spoke out against the deal, telling Memphis's Commerical Appeal: "Infrastructure, providing training through community colleges -- I usually agree with those. It's the one where you make an outright gift or do a sales tax exemption that no other business in the state has, those are the type of things that bother me," Ramsey said.
"This whole Amazon tax issue, that they're not paying sales tax, I just don't think that's something that should ever have been agreed to," he said.
TFT supports the Out-of-State Sales Tax Act (SB 1498/HB 1912) sponsored by Sen. Marrero and Rep. Stewart. The bill would override this exemption by requiring any online or out-of-state vendor selling more than $4,800 of goods in Tennessee annually to collect and remit the state sales tax on items sold. The bill would raise $100 million in additional revenue and improve the climate for our small businesses to thrive.
In addition to the lost revenue and catering to private interests over the public good, the Amazon deal stinks because of the lack of transparency in the negotiations. A public hearing on the Amazon exemption was initially scheduled in February, but quickly cancelled and never rescheduled. Instead of letting the public weigh in on the issue, a backroom agreement was made between a few administrators and Amazon representatives. Unconscionable.
TFT supports the small business owners who have spoken out loudly about the injustice of this deal, and we will stand with them as we fight for greater transparency and accountability in government negotiations with private corporations. We also stand in solidarity with groups like UTK's Progressive Student Alliance who spoke out on campus April 25 to protest budget cuts to higher education and advocate for revenue options like the one Gov. Haslam threw away in negotiating with Amazon.
Wednesday, April 27, 2011
Tuesday, April 26, 2011
Income Tax Ban considered in next 24 hours. Please speak out!
The Senate Judicary and House Finance Committees will consider the resolution today, April 26, and tomorrow, April 27. Please contact them to let them know we cannot permanently remove this revenue option - it would lock TN's highest sales tax in the nation into the Constitution, maintain wealth disparity, and permanently require those with the least amount of income to pay 3 times what the wealthy pay in taxes. The sales tax will also never provide enough revenue to fund the state's needs, keeping TN perpetually behind the rest of the nation in educational attainment, public safety, and access to affordable health care. Unacceptable!!
House Finance, Ways and Means Committee members
Senate Judiciary Committee members
Chattanooga's Times Free Press speaks out against an income tax ban in this article:
"Banning an income tax. The state Senate has already passed legislation to amend the state constitution to ban creation of a general state income tax. Republicans encountered a hiccup in a similar bill in the House when former House Speaker, Jimmy Naifeh, a Democrat, successfully urged House Republicans to accept an amendment also banning an increase in the state sales tax. The bill is now properly stuck on the challenge of fairness and fiscal vision.
The bill should fail. Republicans know the sales tax is cruelly regressive because wage earners typically must spend all their earnings on goods subject to the sales tax. Republicans also know a progressive income tax would help shift the weight of state taxes to the very wealthy, who save most of their money and thus can avoid spending as large a share of their income on sales taxes as ordinary workers must spend.
Banning the income tax would eliminate the only fair alternative to lowering the burdensome sales tax on ordinary Tennesseans. That would hobble the prospect of tax fairness for average Tennesseans for a long time. For fairness, the tax system should be reversed. It hasn’t been, because middle-class Tennesseans have swallowed the Republican Kool-Aid against an income tax, while they get the shaft on the sales tax. One day they will see the light. The income tax should remain available for that day.
House Finance, Ways and Means Committee members
Senate Judiciary Committee members
Chattanooga's Times Free Press speaks out against an income tax ban in this article:
"Banning an income tax. The state Senate has already passed legislation to amend the state constitution to ban creation of a general state income tax. Republicans encountered a hiccup in a similar bill in the House when former House Speaker, Jimmy Naifeh, a Democrat, successfully urged House Republicans to accept an amendment also banning an increase in the state sales tax. The bill is now properly stuck on the challenge of fairness and fiscal vision.
The bill should fail. Republicans know the sales tax is cruelly regressive because wage earners typically must spend all their earnings on goods subject to the sales tax. Republicans also know a progressive income tax would help shift the weight of state taxes to the very wealthy, who save most of their money and thus can avoid spending as large a share of their income on sales taxes as ordinary workers must spend.
Banning the income tax would eliminate the only fair alternative to lowering the burdensome sales tax on ordinary Tennesseans. That would hobble the prospect of tax fairness for average Tennesseans for a long time. For fairness, the tax system should be reversed. It hasn’t been, because middle-class Tennesseans have swallowed the Republican Kool-Aid against an income tax, while they get the shaft on the sales tax. One day they will see the light. The income tax should remain available for that day.
Monday, April 25, 2011
Taxes Matter: Top 10 Stats
Demos is a great organization that provides handy tools on sharing tax information with our neighbors, coworkers, and community groups.
This little ditty is a great conversation starter, and of course, these federal issues are every bit as important and relevant at the state level.
This little ditty is a great conversation starter, and of course, these federal issues are every bit as important and relevant at the state level.
Billionaire Tax Avoidance
Terrence McNally of Alternet.org has this great interview, "How You Can Have a Billion-Dollar Income in America and Pay No Taxes" that highlights the problem and solutions to our "debt crisis".
An excerpt:
Today one of our two major political parties -- nationally and in state capitals -- is unwilling to consider raising taxes no matter the circumstances. Though most of Washington's officials and media are hysterical about the deficit, and willing to hurt anyone in an effort to reduce it, both parties voted in December to extend tax breaks for the wealthiest Americans for two more years.
Despite profits of $14.2 billion -- $5.1 billion from its operations in the United States -- General Electric, the nation's largest corporation, did not have to pay any U.S. taxes last year. Its CEO, Jeffrey Immelt, recently replaced Paul Volcker as leader of President Obama's Economic Recovery Advisory Board as its name was changed to the Council on Jobs and Competitiveness.
TM: We now take in less taxes and grumble about it more while we face huge deficits for which most people's only solution is to make cuts.
DCJ: You will hear that the top 1 percent pay 40 percent of the taxes. It's not true. The federal individual income tax is only about one out of every five dollars of all taxes raised in America. We have federal taxes, state taxes, local taxes, payroll taxes, and I'm ignoring all the things that used to be covered by taxes that are now paid by fees -- three different fees for using the airport, surcharges when you rent a car, etc.
The top 400 taxpayers now make about a million dollars a day. We have redistributed income, through a variety of means -- suppressed unions; reduced taxes and tax deferrals to people at the top; encouraging owners to withdraw capital from their businesses, destroying jobs. In the bottom half, people are making less now than they did 30 and 50 years ago, when you adjust for inflation.
The Republican answer to this is the same answer that George Washington's doctors applied to him when he got sick: they bled him. When he didn't get better, they bled him more, and they ultimately bled him to death. Let's cut taxes for the rich and cut them for the rich and cut them for the rich, and the economy keeps getting worse. It's not true that high taxes destroy jobs. Low taxes destroy jobs by encouraging owners of businesses to withdraw money from the business.
An excerpt:
Today one of our two major political parties -- nationally and in state capitals -- is unwilling to consider raising taxes no matter the circumstances. Though most of Washington's officials and media are hysterical about the deficit, and willing to hurt anyone in an effort to reduce it, both parties voted in December to extend tax breaks for the wealthiest Americans for two more years.
Despite profits of $14.2 billion -- $5.1 billion from its operations in the United States -- General Electric, the nation's largest corporation, did not have to pay any U.S. taxes last year. Its CEO, Jeffrey Immelt, recently replaced Paul Volcker as leader of President Obama's Economic Recovery Advisory Board as its name was changed to the Council on Jobs and Competitiveness.
TM: We now take in less taxes and grumble about it more while we face huge deficits for which most people's only solution is to make cuts.
DCJ: You will hear that the top 1 percent pay 40 percent of the taxes. It's not true. The federal individual income tax is only about one out of every five dollars of all taxes raised in America. We have federal taxes, state taxes, local taxes, payroll taxes, and I'm ignoring all the things that used to be covered by taxes that are now paid by fees -- three different fees for using the airport, surcharges when you rent a car, etc.
The top 400 taxpayers now make about a million dollars a day. We have redistributed income, through a variety of means -- suppressed unions; reduced taxes and tax deferrals to people at the top; encouraging owners to withdraw capital from their businesses, destroying jobs. In the bottom half, people are making less now than they did 30 and 50 years ago, when you adjust for inflation.
The Republican answer to this is the same answer that George Washington's doctors applied to him when he got sick: they bled him. When he didn't get better, they bled him more, and they ultimately bled him to death. Let's cut taxes for the rich and cut them for the rich and cut them for the rich, and the economy keeps getting worse. It's not true that high taxes destroy jobs. Low taxes destroy jobs by encouraging owners of businesses to withdraw money from the business.
Tuesday, April 12, 2011
Wealth Disparity in a Nutshell
Vanity Fair had this great article recently that really outlines how we developed such a huge gap in wealth accumulation, whom it serves, and the policies in place to maintain it. An excellent primer - here's an excerpt:
While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.
First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.
Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.
But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy....
Read More
While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Some people look at income inequality and shrug their shoulders. So what if this person gains and that person loses? What matters, they argue, is not how the pie is divided but the size of the pie. That argument is fundamentally wrong. An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.
First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.
Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
Economists are not sure how to fully explain the growing inequality in America. The ordinary dynamics of supply and demand have certainly played a role: laborsaving technologies have reduced the demand for many “good” middle-class, blue-collar jobs. Globalization has created a worldwide marketplace, pitting expensive unskilled workers in America against cheap unskilled workers overseas. Social changes have also played a role—for instance, the decline of unions, which once represented a third of American workers and now represent about 12 percent.
But one big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy....
Read More
Friday, April 8, 2011
Tennesseans Want Answers on Backroom Amazon Deal
TFT members have been signing our petition (www.fairtaxation.org) asking Amazon to follow the law and collect sales taxes now that they have plans to locate two distribution centers in the state. Local businesses and retailers around the country have joined the call to end these special deals for the corporate giant that gives them an even further advantage and loses valuable revenue for states like Tennessee. Now our legislators are heeding the call and asking the Department of Revenue and Gov. Haslam to reveal what has been promised to Amazon and at what cost to Tennessee.
Thanks to the Chattanooga Times Free Press for this great article on the issue:
Several influential state lawmakers say they want to know what sales-tax break Tennessee is offering Amazon to entice the Internet-retail giant to build two distribution centers in Hamilton and Bradley counties.
“I think a number of people, representatives, would like to see what transpired, how it’s going to work, what are the consequences of this particular situation — and what consequences there could be for the future,” said House Finance Committee Chairman Charles Sargent, R-Franklin.
Traditional brick-and-mortar retailers contend the state has already or plans to exempt Seattle-based Amazon from collecting sales taxes on Tennesseans’ purchases from the company as part of the state’s incentive package.
“We want competition to be fair,” said Roland Myers, president and CEO of the Tennessee Retail Association. “Tennessee’s consideration of a plan to exempt Amazon from collecting state sales tax does the exact opposite and retailers across the state are justifiably upset.”
House Speaker Emeritus Jimmy Naifeh, D-Nashville, said he supports Sargent’s effort.
“I still haven’t found out how we’re going to go about giving them this excuse from [collecting] taxes. That’s the first thing I want to find out.”
READ MORE
Thanks to the Chattanooga Times Free Press for this great article on the issue:
Several influential state lawmakers say they want to know what sales-tax break Tennessee is offering Amazon to entice the Internet-retail giant to build two distribution centers in Hamilton and Bradley counties.
“I think a number of people, representatives, would like to see what transpired, how it’s going to work, what are the consequences of this particular situation — and what consequences there could be for the future,” said House Finance Committee Chairman Charles Sargent, R-Franklin.
Traditional brick-and-mortar retailers contend the state has already or plans to exempt Seattle-based Amazon from collecting sales taxes on Tennesseans’ purchases from the company as part of the state’s incentive package.
“We want competition to be fair,” said Roland Myers, president and CEO of the Tennessee Retail Association. “Tennessee’s consideration of a plan to exempt Amazon from collecting state sales tax does the exact opposite and retailers across the state are justifiably upset.”
House Speaker Emeritus Jimmy Naifeh, D-Nashville, said he supports Sargent’s effort.
“I still haven’t found out how we’re going to go about giving them this excuse from [collecting] taxes. That’s the first thing I want to find out.”
READ MORE
Thursday, April 7, 2011
Don't Fall for this Anti-Tax Scare!
The Millionaire Migration Myth
Virtually every state in the country has a tax system that heavily favors the rich. Despite this fact, only a handful of states responded to the revenue slump brought on by the Great Recession with any sort of tax increase on this favored group. What gives? With so many states looking for ways to balance their budgets, why isn't there more interest in finally making the rich pay their fair share?
The answer lies partially in one of the most effective, yet most absurd anti-tax scare tactics to be used in recent memory: the so-called "millionaire migration" epidemic. State lawmakers across the country have heard again and again that wealthy taxpayers will pull up stakes and move in response to just about any progressive state tax increase. In most cases, however, even a cursory look at the facts shows that these fears are unjustified. With tax day nearly upon us once again, let's take just a moment to make those facts known.
In New York, it was a business-backed group called the Partnership for New York City that first began spreading misinformation about the state's income tax surcharge on the rich. In a February report, the Partnership claimed that
"New York's high taxes risk pushing jobs, tax revenue, and talent to neighboring states. ...Since the imposition of New York's surcharge in 2009, there has been a 9.4% decrease in the state's taxpayers who are worth $1 million or more, decreasing from 381,786 in 2007 to 345,892 in 2009."
That sounds pretty scary, but the same data used by the Partnership shows that every state in the country saw its millionaire population decline between 2007 and 2009, and that a whopping forty-three states experienced declines exceeding New York's 9.4 percent drop. Apologies for stating the obvious, but these declines were a predictable result of the recent recession.
Making matters worse, the original press release accompanying this data made very clear that the U.S. as a whole saw its millionaire population decline by nearly 14 percent between 2007 and 2009. It's therefore a little strange, to say the least, that the Partnership would interpret New York's 9.4 percent drop as providing any evidence whatsoever that could be useful in its crusade against taxing high-income earners.
Oregonians also had to listen to their share of uninformed anti-tax nonsense during the course of the last few months -- this time coming from pundits living clear on the other side of the country. In December of last year the Wall Street Journal's editorial board suggested that a recent voter-approved income tax increase on upper-income families caused up to 10,000 Oregonians to pack their bags and head to Texas. Their "evidence" in support of this claim? 10,000 fewer taxpayers were affected by the tax increase than the state originally expected.
Of course, there's at least one other perfectly reasonable explanation for why fewer Oregonians would be affected: the recession lowered their incomes enough to bring them beneath the starting point for the new tax brackets (only taxpayers earning more than $125,000 - or $250,000 in the case of married couples -- were affected by the tax increase). Unfortunately for the Journal, the data strongly suggest that this is the case.
After just a quick glance at the data, my group -- the Institute on Taxation and Economic Policy (ITEP) -- found that while the state's revenue estimators overestimated the size of Oregon's "rich" population by roughly 34,000, it also underestimated its middle- and low-income population by more than 60,000. Simply put, some 26,000 more Oregonians filed tax returns than the state originally expected. They just earned less income than usual due to the weak economic climate.
What makes this story especially troubling is that, as in New York, there was very clear evidence available refuting the Journal's claims -- had anyone there taken the time to look for it. Almost a full week before the Journal's piece was published, the Oregon House Revenue Committee held a hearing in conjunction with the release of the new data at issue. As is usually the case, that hearing gave the state's revenue estimators an opportunity to offer some very useful context, such as the fact that the 10,000 return discrepancy was due to taxpayers being "driven down the income distribution because [of lower than expected capital gains income], and they [moved] from the affected category to the unaffected categories."
No discussion of millionaire migration would be complete without a look back at the debacle in Maryland. Thanks in no small part to a pair of misleading editorials published by the Wall Street Journal, Maryland's legislature failed to approve legislation early last year that would have extended its temporary tax bracket on incomes over $1 million. Since then, much of the hubbub surrounding the Maryland "millionaires' tax" has died down, but the effect that the Journal's misinformation campaign had on shaping the conventional wisdom on "millionaire migration" makes the issue worth revisiting.
As in New York and Oregon, the question in Maryland revolved around whether high-income taxpayers were migrating or simply becoming less rich. When the Maryland Comptroller released data showing a roughly 30% drop in millionaire filers between 2007 and 2008 (the year Maryland's "millionaires' tax" first took effect), the Journal enthusiastically seized on this figure as proof that the "redistributionists" and "class warriors" had failed in their scheme to "soak the rich."
To its credit, the Journal did exercise a modicum of caution in its first two editorials by reminding its readers that much of this decline was due to the recession, though it continued to insist that the "millionaires' tax" just had to have something to do with this drop as well. ITEP responded to the Journal in multiple reports and an unpublished letter to the editor explaining that more detailed data, provided by the Comptroller's office upon request, indeed confirmed that the vast majority of "migrating" millionaires had simply moved to a lower tax bracket.
Fast forward to last December when the Journal revived the Maryland migration myth in the context of Oregon. This time, the Journal threw caution to the wind and stated flatly that "one-third of [Maryland's] millionaire households vanished from the tax rolls after [tax] rates went up." Of course, this flew in the face of its published claim from nine months earlier that: "one-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008." But that was back before the Journal forgot about the recession. (For the record: even the "one-in-eight" figure was an exaggeration.)
In all three of these states -- New York, Oregon, and Maryland -- the anti-tax crowd ignored a lot of fairly obvious evidence running counter to their claims. Unfortunately, that's the way it's been whenever the "millionaire migration" issue has made its way into statehouse debates. Any shred of "evidence," no matter how meaningless or out of context, has been seized upon by those seeking to construct the anti-tax, vote-with-your-feet narrative they desperately wish was true.
With so much bad information floating around, it's not surprising that most states have been reluctant to eliminate the massive preferences for the wealthy built into their tax systems. But what lawmakers need to know -- and what the Wall Street Journal and others have been refusing to tell them -- is that once you scratch the surface of the millionaire migration issue, it becomes abundantly clear that the anti-tax side's claims have no substance. It's long past time to stop letting the millionaire migration myth get in the way of progressive tax reform.
Virtually every state in the country has a tax system that heavily favors the rich. Despite this fact, only a handful of states responded to the revenue slump brought on by the Great Recession with any sort of tax increase on this favored group. What gives? With so many states looking for ways to balance their budgets, why isn't there more interest in finally making the rich pay their fair share?
The answer lies partially in one of the most effective, yet most absurd anti-tax scare tactics to be used in recent memory: the so-called "millionaire migration" epidemic. State lawmakers across the country have heard again and again that wealthy taxpayers will pull up stakes and move in response to just about any progressive state tax increase. In most cases, however, even a cursory look at the facts shows that these fears are unjustified. With tax day nearly upon us once again, let's take just a moment to make those facts known.
In New York, it was a business-backed group called the Partnership for New York City that first began spreading misinformation about the state's income tax surcharge on the rich. In a February report, the Partnership claimed that
"New York's high taxes risk pushing jobs, tax revenue, and talent to neighboring states. ...Since the imposition of New York's surcharge in 2009, there has been a 9.4% decrease in the state's taxpayers who are worth $1 million or more, decreasing from 381,786 in 2007 to 345,892 in 2009."
That sounds pretty scary, but the same data used by the Partnership shows that every state in the country saw its millionaire population decline between 2007 and 2009, and that a whopping forty-three states experienced declines exceeding New York's 9.4 percent drop. Apologies for stating the obvious, but these declines were a predictable result of the recent recession.
Making matters worse, the original press release accompanying this data made very clear that the U.S. as a whole saw its millionaire population decline by nearly 14 percent between 2007 and 2009. It's therefore a little strange, to say the least, that the Partnership would interpret New York's 9.4 percent drop as providing any evidence whatsoever that could be useful in its crusade against taxing high-income earners.
Oregonians also had to listen to their share of uninformed anti-tax nonsense during the course of the last few months -- this time coming from pundits living clear on the other side of the country. In December of last year the Wall Street Journal's editorial board suggested that a recent voter-approved income tax increase on upper-income families caused up to 10,000 Oregonians to pack their bags and head to Texas. Their "evidence" in support of this claim? 10,000 fewer taxpayers were affected by the tax increase than the state originally expected.
Of course, there's at least one other perfectly reasonable explanation for why fewer Oregonians would be affected: the recession lowered their incomes enough to bring them beneath the starting point for the new tax brackets (only taxpayers earning more than $125,000 - or $250,000 in the case of married couples -- were affected by the tax increase). Unfortunately for the Journal, the data strongly suggest that this is the case.
After just a quick glance at the data, my group -- the Institute on Taxation and Economic Policy (ITEP) -- found that while the state's revenue estimators overestimated the size of Oregon's "rich" population by roughly 34,000, it also underestimated its middle- and low-income population by more than 60,000. Simply put, some 26,000 more Oregonians filed tax returns than the state originally expected. They just earned less income than usual due to the weak economic climate.
What makes this story especially troubling is that, as in New York, there was very clear evidence available refuting the Journal's claims -- had anyone there taken the time to look for it. Almost a full week before the Journal's piece was published, the Oregon House Revenue Committee held a hearing in conjunction with the release of the new data at issue. As is usually the case, that hearing gave the state's revenue estimators an opportunity to offer some very useful context, such as the fact that the 10,000 return discrepancy was due to taxpayers being "driven down the income distribution because [of lower than expected capital gains income], and they [moved] from the affected category to the unaffected categories."
No discussion of millionaire migration would be complete without a look back at the debacle in Maryland. Thanks in no small part to a pair of misleading editorials published by the Wall Street Journal, Maryland's legislature failed to approve legislation early last year that would have extended its temporary tax bracket on incomes over $1 million. Since then, much of the hubbub surrounding the Maryland "millionaires' tax" has died down, but the effect that the Journal's misinformation campaign had on shaping the conventional wisdom on "millionaire migration" makes the issue worth revisiting.
As in New York and Oregon, the question in Maryland revolved around whether high-income taxpayers were migrating or simply becoming less rich. When the Maryland Comptroller released data showing a roughly 30% drop in millionaire filers between 2007 and 2008 (the year Maryland's "millionaires' tax" first took effect), the Journal enthusiastically seized on this figure as proof that the "redistributionists" and "class warriors" had failed in their scheme to "soak the rich."
To its credit, the Journal did exercise a modicum of caution in its first two editorials by reminding its readers that much of this decline was due to the recession, though it continued to insist that the "millionaires' tax" just had to have something to do with this drop as well. ITEP responded to the Journal in multiple reports and an unpublished letter to the editor explaining that more detailed data, provided by the Comptroller's office upon request, indeed confirmed that the vast majority of "migrating" millionaires had simply moved to a lower tax bracket.
Fast forward to last December when the Journal revived the Maryland migration myth in the context of Oregon. This time, the Journal threw caution to the wind and stated flatly that "one-third of [Maryland's] millionaire households vanished from the tax rolls after [tax] rates went up." Of course, this flew in the face of its published claim from nine months earlier that: "one-in-eight millionaires who filed a Maryland tax return in 2007 filed no return in 2008." But that was back before the Journal forgot about the recession. (For the record: even the "one-in-eight" figure was an exaggeration.)
In all three of these states -- New York, Oregon, and Maryland -- the anti-tax crowd ignored a lot of fairly obvious evidence running counter to their claims. Unfortunately, that's the way it's been whenever the "millionaire migration" issue has made its way into statehouse debates. Any shred of "evidence," no matter how meaningless or out of context, has been seized upon by those seeking to construct the anti-tax, vote-with-your-feet narrative they desperately wish was true.
With so much bad information floating around, it's not surprising that most states have been reluctant to eliminate the massive preferences for the wealthy built into their tax systems. But what lawmakers need to know -- and what the Wall Street Journal and others have been refusing to tell them -- is that once you scratch the surface of the millionaire migration issue, it becomes abundantly clear that the anti-tax side's claims have no substance. It's long past time to stop letting the millionaire migration myth get in the way of progressive tax reform.
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