Tax the Rich: They'll Stay Put

Whenever liberals want to raise taxes on millionaires or businesses, conservatives start saying that if we raise taxes, those people will take their money elsewhere. This argument came up in New York, when Gov. Cuomo rejected a millionaire's tax in favor of a budget that cut funding for schools, homeless shelters, and a slew of other programs that help both normal people and the less well off. New Yorkers were supposed to worry that if the state raised taxes, all of the bankers, who do provide a notable chunk of the state's tax revenue, would move to Connecticut.

It seems unlikely that higher taxes would chase people or businesses away, though, particularly from cities as nice as New York or countries as nice as America. There are substantial benefits to living in these places: In New York, bankers, lawyers, and real estate moguls might pay higher taxes, but they also have easy access to all the other products and services they might want to spend their money on, like Hermes jewelry or dinner at Per Se.

And, in fact, moving from New York City to a place like Connecticut does not play out well. Fifteen years ago, UBS, the Swiss bank, moved its North American headquarters to Stamford, Connecticut, but now it's coming crawling back to the city. It turns out that young, talented investment bankers don't want to schlep 45 minutes out to a city that has less to offer culturally, socially, and culinarily. Neither do the bank's clients. New York might be expensive, but it's not like the people and companies who chose to locate here aren't paying that premium for a reason.