Not so fast

by: Thurman Hart

Sun Feb 07, 2010 at 02:01:32 PM EST

A foible of our humanity is that we often look at something and see exactly what we want to see instead of what's there. I remember a psychological study I was shown in my undergrad years that asked people to look at a photograph of a car wreck and then answer some questions. If asked if a headlight were broken, 50% of the people said no. Which means they were probably guessing. If asked if they noticed that the headlight on the blue car was broken, upwards of 80% would say yes - regardless of whether the blue car had a broken headlight, or even if there was a blue car in the photo.

This highlights the problem of bias in social sciences. But it should also serve as a warning for anyone who attempts to use an academic study for political purposes. If you want the long version of this post, jump over to GSP. If you just want the short version, click on through to the other side.

Thurman Hart :: Not so fast

First of all, the study makes no mention of taxes on migration in or out. Secondly, there are some important parts that are simply not being mentioned. To quote myself:

What we can tell is that:
1) In the last five years, greater wealth has moved out of the state than moved in - largely due to:
1a) Less international migration of wealthy people into New Jersey - but since international migration is down overall, this is not particular to New Jersey and is likely due to two things - toughened immigration requirements and the worldwide economic downturn.
1b) Increased movement to Florida - again due to two factors - people retiring and moving south; and the finance industry consolidating and moving south after 9/11
2) Younger, higher-income earning wealthy households have moved into New Jersey to replace older, wealthier, lower-income wealthy families - so overall wealth is temporarily lost. But as these new families remain in Jersey and accumulate wealth, they will catch up with those who are now moving out.
3) The largest reason for people moving out is because of their job (new job or retiring) or because they get divorced or married. Neither of these reasons is directly related solely to taxes.
4) The overall loss of wealth with rising income may pose a danger to charitable contributions - which is what the study was trying to find - but it actually bodes well for tax revenues, to the extent that it impacts the revenue/tax picture at all. In fact, the only tax-related conclusion from the Community Foundation of New Jersey, which co-sponsored the study, is this:
New Jersey's state income taxes have risen to levels above New York, Pennsylvania and Connecticut, and there is not a deduction on state income taxes for charitable giving.

5) While the difference in the periods is stark, there is no disaggregated information given that indicates why these two periods are chosen. The economic problems of the latter half of the second period are probably going to have an outsized negative impact, especially for those families whose wealth is tied closely to the stock market.

The take-away money shot: Taxes had nothing to do with the migration patterns seen in this study. They aren't even on the radar.