Media reports are filled with stories of wealthy New Yorkers and pro golfers in California threatening to move to escape high taxes.
And anecdotally, there is plenty of evidence that the wealthy are just not going to take it anymore. Golfer Phil Mickelson spoke for many pro athletes when he said he was "going to have to make some changes" after California's tax hikes.
But new data on the population of millionaires suggest little connection between tax rates and a state's population of millionaires. If millionaires are moving out, many more are moving in—or being created.
A new state-by-state count of multimillionaires shows that some of the highest tax states created the most millionaires. The study, from UBS and Wealth-X, ranked states by their populations of people worth $30 million or more—presumably the most mobile part of the wealth chain and the most sensitive to taxes.
California was the top producer of multimillionaires over the past year, gaining more than 1,600 people worth $30 million or more. The state also has the nation's highest tax rate—13.3 percent—for people making $1 million or more.
Yes, California has the largest population. But even on a percentage basis, several high tax states had big millionaire gains. The number one gainer of multimillionaires on a percentage basis was Massachusetts, aka "Taxachusetts" because of its tax rates.
New York City, which has a combined city and state tax of over 12 percent, was the number one city for adding multimillionaires worth $30 million or more over the past year. That's largely thanks to financial markets, no doubt.
This is not to say that low tax states don't also gain millionaires. Of the top 10 states that gained the most millionaires, two don't have state income taxes: number two-ranked Texas, and number-three ranked Florida.
On a percentage basis, Tennessee, which has no income tax (except for a levy on certain capital gains and dividends) came in second place, behind Massachusetts.
Meanwhile, some of the biggest losers of multimillionaires had low taxes while some had high. The biggest losers on a percentage basis included Connecticut and New Jersey, which have high taxes. But the losers also included Kansas, which has lower taxes.
In short, the report shows that a state's tax rate doesn't correlate to its net gain or loss of multimillionaires—a finding that echoes other research on the effect of tax rates on millionaire migration. Broader economic factors seem to matter as much or more than taxes for millionaire counts—like economic growth, business environment, the role of finance in the economy and the type of local industry.
"There are many reasons people settle in certain states," said Kim Rueben, an expert on state and local public finance with the nonpartisan Tax Policy Center. "Creating a functioning business takes much more than low marginal tax rates."
Demographics may also play a role. While older millionaires may be moving out of California and other high tax states, younger millionaires are being added through high-tech and other fast-growth businesses.
"You might have movement with people retiring," Rueben said. "But you have people trying to make their fortunes figuring out what the best environment is to be in business."