These arguments are not stupid. Each one describes a real mechanism. The problem is that the evidence consistently shows those mechanisms operating at a fraction of the scale their proponents claim — and the people making these arguments are usually the ones who would pay the tax.
The largest study on millionaire migration in the United States — 45 million tax records, 3.7 million unique filers, thirteen years of IRS data — found that the annual migration rate for millionaires is 2.4 percent. That is lower than the general population’s rate of 2.9 percent. In the average state with over 9,000 millionaires, a one-percentage-point tax increase results in a net loss of about 23 people.
Why? Because earning power is place-specific. It comes from networks, clients, collaborators, market position — not just talent. A hedge fund manager in New York does not become equally productive in Austin by changing their address. The threat is real at the margins. It is not real at the scale that would make the policy irrational.
The international version of this argument is weaker still. The United States taxes based on citizenship, not residence. Moving abroad does not eliminate the obligation. Renouncing citizenship triggers an exit tax on unrealized gains. The doors are not as open as the argument implies.
The best recent natural experiment is the 2017 Tax Cuts and Jobs Act, which cut the corporate rate from 35 to 21 percent — the largest corporate tax cut in modern U.S. history. If lower taxes drive investment, we should have seen a surge.
What happened: stock buybacks rose 88 percent in the first year. The investment response was, in the language of the academic literature, “muted.” Companies used the tax savings to buy back their own shares, which increases stock prices and benefits shareholders — disproportionately the wealthy. The promised wage increases and capital expenditures did not materialize at the predicted scale.
This does not mean corporate tax rates are irrelevant to investment. It means the relationship is far weaker than the argument assumes, and the primary beneficiaries of cuts are not workers or communities but shareholders.
A 2022 study in the Socio-Economic Review examined fifty years of major tax cuts for the rich across advanced economies. The finding: tax cuts for the wealthy increase income inequality in both the short and medium term, but have “no significant effect on economic growth or unemployment.”
This is the core of it. The trickle-down hypothesis has been tested for half a century across dozens of countries. The money does not trickle. It accumulates.
Jobs are created by demand, not by supply. When consumers have money to spend, businesses hire to meet that demand. When they don’t, businesses sit on cash — or buy back stock. The 2017 tax cut demonstrated this at national scale.
All three arguments share a structure: they are threats dressed as analysis. Tax us and we’ll leave. Tax us and we’ll stop investing. Tax us and we’ll stop hiring. Each threat contains a grain of truth. The grain is then inflated to justify a policy that benefits the people making the argument.
The question is not whether these mechanisms exist. They do. The question is whether we set tax policy for 330 million people based on the preferences of the few thousand who might follow through on the threat. That is not economics. That is a hostage negotiation.
The counter-arguments deserve evidence, not dismissal. I have tried to provide both.