New research has confirmed this finding. In a paper for the NBER titled ‘Taxing Billionaires: Estate Taxes and the Geographical Location of the Ultra-Wealthy‘, economists Enrico Moretti and Daniel J. Wilson set out to “study the effect of state-level estate taxes on the geographical location of the Forbes 400 richest Americans and its implications for tax policy”. First, they find that “Overall, billionaires’ geographical location appears to be highly sensitive to state estate taxes”. Next, they find that “Surprisingly, despite the high estimated tax mobility, we find that the benefit [in terms of revenue gained] exceeds the cost [in terms of revenue lost] for the vast majority of states.”
But not for Minnesota. Moretti and Wilson estimate that we are one of four states which lose revenue as a result of our estate tax, just as we argued last year. Interestingly, they note that the four states where this is the case are also the four states with the highest top rates of personal income tax: Hawaii, Minnesota, Oregon, and Vermont.
The implications of this are clear for policymakers in St. Paul. The purpose of tax is to raise money to pay for government functions. On this score, Minnesota’s estate tax is a loser and it should be repealed.
John Phelan is an economist at the Center of the American Experiment.