Kennedy: Why Wealthy flee NYC? Rational people, basic, fundamental economics leave high-tax states

On 3/18/2023, UCLA Tax Law and Policy professor and former Biden Administration official Kimberly Clausing testified before the Senate. Louisiana Republican Sen. John Kennedy grilled a progressive tax law professor about why so many wealthy people are fleeing New York City.

Mr. Kennedy asked Dr. Kimberly Clausing this question: why are so many wealthy people leaving New York City?

“New York City is an incredible city of innovation, immigration, entrepeneurship-”

“Why but why are wealthy people leaving?” Kennedy jumped in.

“Well I don’t think there are people who are fleeing New York City-”

“Sure there are! There’s thousands,” Kennedy cut in. “Study after study after study. Why are so many wealthy people leaving New York City?”

“I think there’s an enormous number of wealthy people who are in New York City,” Clausing said before Kennedy again jumped in.

“But why are so many leaving?” Kennedy pressed.

“I can’t speak to why particular people are-”

“I can tell you why, it’s taxes,” Kennedy again chimed in. “You know that, as well as I do, it’s taxes.”

“I think if you look at the economic-”

“Some of it’s crime,” Kennedy interrupted. “But most of it is taxes. People vote with their feet the same reason people are leaving California and moving to Austin.”

Clausing, “If you look at California, it’s one of the most successful economies in the world, and it continues to be so. It attracts people.”

Kennedy: “But they’re losing people.”

Clausing: “I don’t think it’s in any danger of decline, nor is New York City. And these are very vibrant places.”

Kennedy: “I don’t think we’re ever going to agree. Yeah, I don’t think we’re ever going to agree. Um, but I appreciate the time of all three of you. Thank you.”

U.S. Senate Committee on the Budget Chair Dem Sheldon Whitehouse (RI) defended Clausing.

Sheldon: “To be fair, there also are people moving the other way. There are people who move to New York. They just don’t all leave from New York. It’s a two-way street in and out of New York, and it’s a two-way street between Austin and California. People leave Texas and go to California, and some of them do very well.”

Kennedy: “That’s true, Sheldon, but I can show you, as you well know and as the professor knows, it shows that people are leaving high-tax states and moving to low-tax states. All you have to do is, well, they also leave, and all you have to do is look at the demographics. Take pick the nine states that have, say, a state income tax and compare that to the states that don’t have a state income tax, and compare that to that to the states that do. It’s called tax avoidance, and there’s nothing wrong with it. It’s perfectly legal.

Clausing: People have different preferences. You know, if you look at where immigrants choose to live in the United States, they often go to those same places that you were talking about, you know. So, I do think that there’s movement in both directions.

Kennedy: Yeah, but here’s what, here’s my point. Here’s what I think rational people do, and here’s what I bet all three of you would do, and I bet Sheriff would do, I mean, uh, Sheldon would do it because he’s a smart guy, okay? If he won the lottery tomorrow and won 10 million dollars and paid his taxes and has six million dollars left, he’s going to at least consider, you are too, moving to Florida, because we don’t have a state income tax.

Sheldon: For the record, no, I wouldn’t. Never crossed my mind.”

Kennedy: “Well, most rational, Well, I don’t mean you’re irrational, you know that, but it can be quite rational. Tonight, but when you’re liquid, when you’re liquid and you don’t have to pay a six percent off the top versus zero percent, it’s a rational economic move, is it not?”

McBride: “I agree. It’s rational. I mean, um, I mean the thing about taxes that we’re talking about is there a cost or a price, and so claiming that the cost or price doesn’t matter is essentially throwing out the very basic law of demand, basics, the basic, uh, fundamental, uh, idea in economics: the prices matter, the costs matter.

Kennedy: See, this one, this is what this always boils down to, and there’s no, there’s no way we’ll ever agree. Okay, but at least two of you believe that government, all things being equal, can spend a dollar better than people can. And that’s, that’s your, your, this is America. You can believe that.

Sheldon: For the record, that’s not in their testimony.

Kennedy: I just, I just don’t agree with you. I think people can spend the dollar better all things being equal, and all you have to do if you, if you know the history of government, you know that I’m right. But I don’t expect you to agree with me because you’re professors. Okay, thanks

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Kennedy: Why Wealthy fleeing NYC? Rational people, basic, fundamental economics leave high-tax states