Myths about High Taxes
Updated: 2013-03-03 08:04
(The New York Times)
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Talk of millionaires fleeing to friendlier havens is a familiar tale when higher taxes are on the political agenda. Gerard Depardieu's visit to Moscow to accept honorary citizenship from President Vladimir Putin in early January - in protest over a proposed increase in the top tax rate to 75 percent in his native France - made headlines.
Since then, Mr. Depardieu has been spotted dancing to traditional Chechen folk music in Grozny at the end of February, just after he registered as a resident of Saransk, a city of close to 300,000 about 650 kilometers east of Moscow. He says he plans to move there, away from the crowds in Moscow, and will build a house and learn Russian. And also, presumably keep more of his euros while paying his taxes at the 13 percent flat rate in Russia.
But it turns out Mr. Depardieu's move is rare.
The notion of tax flight "is almost entirely bogus - it's a myth," Jon Shure, director of state fiscal studies at a research group in Washington, told The Times. "The anecdotal coverage makes it seem like people are leaving in droves because of high taxes. They're not. There are a lot of low-tax states, and you don't see millionaires flocking there."
California just instituted higher taxes on the wealthy - at 13.3 percent it is the highest in the United States - to help close a long-standing budget gap. This caused a snit by the professional golfer Phil Mickelson, who suggested maybe it was time to move to Florida, where his colleague Tiger Woods lives, and which has no state income tax.
David Geffen, the entertainment mogul, told The Times: "I am happy to pay my taxes, whatever they are: no problem with me." He owns estates on the oceanfront in Malibu and Beverly Hills and said he thought it could hurt the business climate, but added, "I don't think anybody of means is really going to move because of it."
Rich people are unlikely to move for the same reasons middle class people stay put. They like their homes, their friends live nearby, their children are in school, their jobs are connected to the place they live and moving is a hassle.
Cristobal Young, an assistant professor of sociology at Stanford University, told The Times that "entrepreneurship and earning power are clustered in highly competitive regions like Silicon Valley, Los Angeles and New York City. People making over a million are typically close to their peak income years, and are enjoying the fruits of long-term career investments. This is hard to walk away from."
But the flight east by Mr. Depardieu has a long tradition, as Russia's largesse has lured French celebrities over the centuries, affirming its place as a center of European culture. Catherine the Great purchased the library of the indigent French philosophe Denis Diderot, The Times reported, and offered him a salary to serve as its librarian in St. Petersburg in 1773.
Catherine's invitation came at a time when kings made a show of seeking the guidance of philosophers. For Diderot, whose treatise on government stated that nature and reason should guide rulers in creating greater liberties for their subjects, the invitation to influence the empress was too good to pass up. And he was broke.
Catherine was thrilled with Diderot's friendship, but she had disdain for his idealism. "If I had followed his advice," she reportedly said, "everything would have been turned upside down in my kingdom."
Tom Brady
The New York Times
(China Daily 03/03/2013 page9)