Gruenhagen recommends questionable story on tax hike refugees to constituents

Minnesota Representative Glenn Gruenhagen sent his constituents his weekly email newsletter Tuesday, cautioning them to purchase fishing licenses  now in advance of the looming likelihood of  a state government shutdown.

However, the Sibley County legislator was not content to leave it at that practical level, and concluded with a recommendation for a little summer reading:

I still hope we can find a breakthrough with the budget in time to avert a shutdown and I will keep you posted as things develop. I did come across an interesting Wall Street Journal article that shows how Gov. Dayton’s “tax the rich” plan has backfired elsewhere. Here is the link: http://online.wsj.com/article/SB124329282377252471.html.

The URL links to a May 2009 Wall Street Journal article, “Millionaires Go Missing: Maryland’s fleeced taxpayers fight back.”

However, his constituents may wish to consider whether the reading is beach-ready as commentary or as fiction.  Though the Wall Street Journal article is an article of faith among those advocating an anti-tax-the-rich agenda,  the liberal-leaning Institute on Taxation and Economic Policy suggested in 2009 that the millionaires hadn’t moved to a new state, but rather to a different tax bracket:

[A]s a result of legislation enacted in 2007 and in 2008, income tax rates for affluent Marylanders were higher this past year, not just for residents with taxable incomes over $1 million, but for individuals with taxable incomes above $150,000 and for families with incomes over $200,000. Consequently, if it is the case that wealthier taxpayers respond to changes in income tax liability by changing their state of residence, one would expect to see that response not just for taxpayers with incomes above $1 million, but, to some degree, among all affected taxpayers. The Comptroller’s preliminary data suggest that this is not the case.

With the exception of “millionaires”, the number of returns in the affected ranges of taxable income appears to have grown between 2007 and 2008. Given recent economic events – and, in particular, the widely-anticipated decline in income from capital gains, which are received almost exclusively by the very wealthiest residents of each state – a far more likely explanation for the alleged disappearance of Maryland’s millionaires is that, for 2008 at least, they are no longer millionaires. Instead, their incomes may now fall in lower ranges of the distribution, thus potentially accounting for some portion of the increase in the number of returns in those ranges.

Do high income filers flee a state when its taxes are raised? The question is a complex one. In “On taxes, let’s recognize business arguments for what they are,” Growth and Justice’s Charlie Quimby took a broader look at the question.

All three pieces are worth a look while Minnesotans wait for a deal or shutdown.