Menu Bar

Home           Calendar           Topics          Just Charlestown          About Us

Friday, September 6, 2019

“Flight of the Earls” debunked again

No, the rich aren’t fleeing Rhode Island
EDITOR’S NOTE: the so-called “Flight of the Earls” caused by RI taxes has been covered here several times (HERE and HERE and HERE and HERE for example) before. In each instance, new data shows that people leave for many reasons, and taxes are among the least among them. –Will Collette

Lincoln Chafee is in the news again – this time for a prospective 2020 presidential bid on the Libertarian Party ticket. Last time Chafee made headlines, the eccentric former Rhode Island governor and senator had announced he was leaving the Ocean State for Wyoming.

Why would Chafee – scion of a Rhode Island political dynasty – move to Wyoming? 

His explanation was straightforward. “Stephanie [Chafee, a philanthropist and Lincoln’s wife] just loves all the wildlife and western beauty and made her decision to reside and vote in Wyoming based on the time spent here … Of course, I enjoy returning to an area in which I made a good living after college,” Chafee told the Providence Journal.

Some unconvinced politicos and commentators offered their own theory: Rhode Island’s taxes had pushed the Chafees, and other wealthy families, to low-tax states. 

“We need to keep Chafee and other wealthy charitable individuals in Rhode Island,” wrote then-Rhode Island Republican Party chairman Brandon Bell. “But we can only do this by lowering our taxes. This begins by eliminating Rhode Island’s estate tax.” The Providence Journal echoed: “If you have significant wealth, any financial adviser will tell you that your family cannot afford to have you die as a Rhode Islander.”

Elected officials and commentators have long argued that Rhode Island’s income and estate taxes drive wealthy families like the Chafees elsewhere. In a 2011 column for the Valley BreezeArlene Violet warned the state’s income and estate taxes were causing “financial suicide” by “[a]ttracting low income wage earners and expelling higher paid people.” 

The same year, representatives from the Greater Providence Chamber of Commerce argued that tax cuts for high-income Rhode Islanders were necessary to stop taxpayers from “bolting” to other states. 

Are the rich really fleeing Rhode Island? To find out, I analyzed fifteen years of IRS interstate migration data showing the number of households and aggregate income moving between states.

Here’s the upshot: there is no discernible exodus of high-income Rhode Islanders. On average, households moving out of Rhode Island are poorer, not richer, than households that stay put.

In 2016 (the most recent year with available data), households that moved out of Rhode Island were about $4,000 poorer on average than households staying in Rhode Island. 

Looking back over the 15 year period from 2002 to 2016, and adjusting for inflation, the average out-migrant household has been about $8,400 poorer than the average non-mover. The data do not show a “loss of rich people.”

Nor do they show the state “[a]ttracting low income wage earners and expelling higher paid people.” 

Between 2002 and 2016, households moving into Rhode Island and those moving out looked nearly identical in income. The average out-migrant’s household income was just $13 higher than the income of the average in-migrant.

In all states, not just Rhode Island, the rich are less likely than the poor to move across state lines. When the rich do move, they are barely responsive to state tax rates. 

Sociologist Cristobal Young explores this phenomenon in his recent book The Myth of Millionaire Tax Flight: Why Place Still Matters for the Rich. Summarizing his research in the Guardian, Young writes:
While travel may be a classic “luxury good,” migration is not. Moving one’s home, life and family to a different place is mostly about people who have a poor economic fit with where they live, earn below-market incomes, and are struggling to find a livelihood. Higher income earners show low migration levels because they are not searching for economic success – they’ve already found it.
While Lincoln Chafee’s political future is uncertain, we can be sure of one thing: taxes did not drive the wealthy former governor and his family to Wyoming. 

When asked by GoLocalProv whether Rhode Island’s taxes influenced his move, Chafee succinctly answered, “no.”

The Chafees are not unique in this respect. Taxes rarely push the rich across state lines.

Andy Boardman is a policy advocate who frequently writes about economic matters in Rhode Island from an egalitarian perspective.He can be found on Twitter at @_andyboardman."