By Jon Margolis
Editor’s note: Jon Margolis is a VTDigger’s political columnist
What with elections in the offing, the ideologues have awakened from their seasonal torpor and with them a familiar old cry — one might even call it a meme if only one knew what a meme was — about how Vermont had best lower its tax rates on rich folks lest all the rich folks move to Florida.
To their collective credit, the candidates for governor have not yet joined this chorus, not even Republicans Phil Scott and Bruce Lisman, who pledge their best efforts to try to hold down taxes and possibly even reduce them.
But the point gets made in off-stage remarks at candidate debates, in letters to the editor and in an occasional opinion article in print or online.
On the conservative website Townhall.com, the site’s associate editor, Matt Vespa, who seems to live in Virginia, wrote that wealthy people have been “fleeing Vermont” for years and would flee even faster thanks to some tax increases enacted this year.
(That article was distinguished by what may be the danglingest subordinate clause in recorded history. No need to repeat it here; the curious may check the Townhall website.)
And at VTDigger a few weeks ago, Don Keelan, who does live in Vermont (in Arlington), warned that high income and estate taxes would persuade more of “the state’s wealthiest”to move to states that impose neither tax.
They have a point. Some Vermonters move to Florida (and elsewhere) primarily to save on taxes. Some just leave Vermont altogether. Others make what had been their winter getaway their principal residence but return to Vermont for the summer.
Why shouldn’t they? After all, if they spend, say, November through February down there to get away from the cold and snow, like their Florida homes and have friends there, it makes perfect sense to spend another two months (plus a day), declare themselves Floridians, and pay no state income tax.
Some people do that. More can be expected to do it in the future. That could explain why Florida has — proportionately, of course — more wealthy people than Vermont, why its share of millionaires is higher, and why it has a higher median household income, the standard measurement of a state’s prosperity.
Uh, check that. It could explain all that if it were true. It is not. Vermont is the richer state, and the one with more millionaires.
Vermont’s median household income — $52,776 in 2014 — was the 19th highest in the country, slightly higher than the national median of $50,502. Florida’s $44,299 was 37th.
As to millionaires, the portion of Vermont households with more than $1 million of “investable assets” in 2014 was 5.86 percent, according to an analysis by the Phoenix Global Wealth Monitor. That was the 11th highest ranking in the country. Florida’s rate was 4.62 percent, the 32nd highest. Furthermore, Vermont’s ranking has been going up; it was 22nd in 2012, while Florida fell from 20th.
In short, there is scant evidence that scads of wealthy Vermonters have been decamping to Florida, or anywhere else for that matter.
Nor, when you think about it, is any such exodus likely. As mentioned, it makes perfect sense for some people to make that move. But very, very few. First, the person or family has to want to live in Florida. A nice place, Florida, but not much in the way of hills, mountain lakes, cold-water streams, ski slopes or leaves that turn color in the fall — the stuff that makes Vermont appealing to many people.
And with few exceptions, it’s a move that makes sense only to retirees. Maybe a few folks who live on investment income, or a business owner whose company does not need his or her regular, hands-on attention. But how many business owners think their company does not need them?
So most of them stay here, which could be one reason there are more rich Vermonters every year. In 2014, according to the Tax Department’s records, 559 Vermont households reported taxable income of more than $1 million and 1,203 between $500,000 and $1 million. Both those numbers have been steadily rising since 2010.
It’s true that many people leave Vermont for other states, slightly more than the number who move in from other states. This population loss — some 5,000 over the last decade or so —has been just about offset by arriving migrants from abroad, mostly from Canada and Europe, but increasingly from Latin America and Asia.
The net domestic outmigration might (or then again, might not) be something to worry about. But it is hardly unique to Vermont. For the year ending in July 2014, more than half the states saw more people leaving for other states than coming in from other states. Some of these were high-tax states, but others were not.
And whether they were moving in or out, most of these movers were not wealthy. Rich people move substantially less than others. A recent study in the American Sociological Review found that only about 2.4 percent of the roughly 500,000 who report income of at least $1 million each year move. Lower-income people move much more frequently. According to the Census Bureau, about 12 percent of Americans move every year.
Again, this makes sense. Rich people tend to have very nice houses, houses they might have had built (or rebuilt) to their own specifications, perhaps on land they picked out for the purpose, in neighborhoods with good schools for their children. Their spouses are likely to have high-paying jobs. They are more likely than most other people to be on the board of directors of the hospital, the museum, the local orchestra and other cultural institutions. They have strong roots.
And many of the highest earners in all states are professionals — doctors, dentists, lawyers, accountants. They can go anywhere; they cannot expect their patients and clients to follow. Building a new customer base in a new location would take years, hardly an incentive for a professional in his or her top-earning years.
Movers from one state to another tend to be younger and are more likely to be middle-income or even poorer. That would no doubt describe most of the 1,493 Vermonters who moved to Florida in 2014 (less than half the number who moved to high-tax New York, Connecticut and California), according to analysis of federal data by the Public Assets Institute. It would also make up most of the 994 Floridians who relocated to Vermont.
That analysis also found that people moving into Vermont were more affluent than the people moving out. The net impact on the state’s tax revenue, then, would appear to be positive, even with the loss of a few wealthy folks with hefty state income tax payments.
Which, remember, they deduct from their federal taxable income, as they do their property taxes, meaning the net cost to them is 60.1 percent of the nominal payments. Still a fair amount of money, but less than the raw figures would indicate.
Vermont, like every other state, has its economic problems and some things to worry about. Rich folks moving to Florida is not one of them.