A Replication of “Millionaire Migration and State Taxation of Top Incomes

Abstract

We reevaluate Young and Varner’s (YV) study of the effect of New Jersey’s 2004 income tax increase on migration. The 2004 “millionaires’ tax” raised New Jersey’s marginal income tax rate from 6.37 percent to 8.97 percent on incomes over US$500,000. YV reported that the tax change apparently had no effect on net out-migration of affected taxpayers (relative to other affluent taxpayers); however, this result appears to be due to their modeling New Jersey out-migration and in-migration simultaneously to determine net migration effects. Correcting for this, we find a statistically significant increase in the out-migration of taxpayers making over US$500,000 of roughly eighty per year in the years following the tax change. Given that the increase likely spurred out-migration in groups not directly taxed and discouraged in-migration, our estimates may understate the actual impact of the tax on New Jersey net out-migration.