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Where Have All the Millionaires Gone?

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Several states, including Maryland and New Jersey, have reported a decline in their millionaire population in the past couple of years, and advocates for cutting taxes have been quick to argue that this shows high-income residents are fleeing to other states with lower taxes.

But new IRS data call this claim into question, showing that the number of households in the entire country with incomes above $1 million dropped by 18 percent in 2008 (see chart).


No one is suggesting that this decline means millionaires are leaving the United States because their taxes are too high. Instead, the logical explanation is the combination of the stock market collapse and the general economic downturn. The same thing happened close to a decade ago after the bursting of the dot-com bubble and the 2001 recession, as the chart shows.

Those at the top of the income scale derive a large share of their income from investments. When the stock market crashes, their incomes take a big hit — if only temporarily. Incomes at the top took off again shortly after the 2001 recession, for example.

So the next time you hear someone saying a state should cut taxes to keep the wealthy from departing, keep in mind that in difficult economic times like these, most of them are moving down, not out.