“Taxing income is not going to get you where you need to be, the way taxing wealth does.”

So declared Sen. Elizabeth Warren, defending her much discussed wealth tax plan at the most recent Democratic debate. Doubters say the uber-rich would work hard — and largely succeed — in protecting their assets if Warren got her tax, as other countries have learned when they tried and often abandoned wealth taxes.

But on Friday, Warren proposed quadrupling the levy she’d impose on the largest fortunes, as part of her vow to fund “Medicare for All” without raising taxes on the middle class.

An intriguing new study sheds mixed light on the challenges of taxing piled-up riches.

Billionaires never have been exactly popular. But nowadays, many Americans’ attitude seems to be that the only good billionaire is … an estate-tax-paying billionaire.

Anyhow, for now the “death tax” (aka estate tax) is the main levy America imposes on accumulated wealth.

The new study focuses on the most aromatic of the stinking rich — Forbes magazine’s list of the 400 wealthiest Americans — and finds that state-level estate taxes pay off rather richly for the minority of states that levy them, even though these burdens do seem to inspire a fair number of plutocrats to move away to balmier tax climes.

There are, however, exceptions. Some states try to pluck the golden geese in too many different ways — and end up worse off as a result.

Which states might those be? We’ll come back to that.

Whether differences in state taxes actually inspire the well-off to relocate has long been a source of controversy and conflicting findings. It’s hard to track the migrations of a large and loosely defined population of “the rich” — and still harder to pin down where such people move and why.

In a paper published last month by the National Bureau of Economic Research, Enrico Moretti of Berkeley and Daniel J. Wilson of the San Francisco Federal Reserve Bank seek to solve the puzzle by zeroing in on a small, well-studied population with billions of reasons to be mindful of estate taxes — Forbes’ invitation-only club of the richest Americans.

Luckily, estate taxpayers are also a group of subjects upon whom an abrupt “natural experiment” was conducted some years ago, where state-level estate taxes are concerned.

In 2001, Moretti and Wilson explain, a major federal tax bill was enacted. Among many other things, it repealed a federal estate-tax credit for estate taxes paid at the state level.

Then as now, the federal government levied a substantial tax on large estates at death, but only a minority of states had estate taxes of their own. (It was 14 states as of 2017, the researchers say, Minnesota among them.) Until 2001, the feds had long allowed estates to, in essence, deduct any state “death tax” from their federal estate-tax tab.

The result was that, before 2001, one’s total, net estate tax was unaffected by the state one lived in (or rather, died in), whether it had an estate tax or not.

But after 2001, any state-level estate tax suddenly was paid in addition to the federal tax.

This was a big deal to your average billionaire.

Moretti and Wilson set out to study whether the suddenly high price of ending one’s days in a state with an estate tax was followed by any relocations among the richest of the rich.

It was — especially as they got older.

In their starkest finding, the researchers show that within nine years of the change, about 43% of “old Forbes billionaires” (over 65) who had been living in estate-tax states in 2001 had moved to states without such taxes.

Not a single one had moved from a non-estate-tax state to an estate-tax state.

But does this mean that states lose more than they gain by imposing estate taxes? Does losing out on the annual income tax payments of billionaires who move away cost state treasuries more than they collect when the billionaires who stick around receive their final dividend?

The answer — “surprisingly,” the economists admit — is no.

“Remarkably,” Moretti and Wilson write, “the gain for the average state from taxing the estates of the remaining billionaire population exceeds the loss of income tax flows from those billionaires that flee.”

How much net benefit states enjoy from taxing billionaire estates varies quite a lot, depending mainly on a state’s income tax rate. The higher a state’s top income tax rate, the more annual revenue it misses out on when an old billionaire wanders off.

Still, Moretti and Wilson calculate that if every state in the union enacted a “billionaire estate tax” only on the very largest fortunes, all but one would come out ahead. Only California, with America’s highest income tax (but currently no estate tax), would lose more than it would gain.

But what of real-world estate taxes, the kind states actually impose — taxes that tap fortunes far below billionaire levels? (The federal estate tax currently hits estates above $11.4 million; Minnesota taxes estates above $2.7 million.)

Moretti and Wilson note that we can’t be sure the “merely wealthy” are as sensitive as the “ultrawealthy” to estate taxes — and as likely to relocate to avoid them. And even assuming that they are, the researchers calculate that even broader estate taxes also pay off on net … for most states.

Here again, however, states with lofty income tax rates have a lot to lose each time a high-income resident departs. And by piling on with a broad estate tax, such states may resemble the proverbial dog seeing his reflection in a pond and dropping the bone he already holds in an attempt to snatch yet another.

Assuming the merely wealthy behave much like the ultrawealthy, write the researchers, “Among the 14 states that had an estate tax as of 2017, the benefits of having it exceed the costs in all but four high [income tax] states: Hawaii, Minnesota, Oregon and Vermont.”

Minnesota policymakers may want to ponder this suggestion that the estate tax actually costs state government money here. And policymakers everywhere should note that Moretti and Wilson are at pains to “caution that … our measure of costs only includes the direct effects on state revenue … . It does not include potential indirect effects.”

When and if wealthy residents decide to find a new home, they may well take business enterprises with them, or at least some of their investment dollars, nonprofit contributions and sizable personal energies and abilities.

I would be remiss here if I didn’t mention the example of Star Tribune owner Glen Taylor, one of Minnesota’s Forbes 400 members, who purchased this newspaper five years ago. He did so, amid many challenges in the news business, “half with my head, half with my heart,” as he put it in a commentary on these pages. His goal, Taylor wrote, “is to be a good steward of this vital Minnesota asset.”

To be sure, not every capitalist has community service ideals. But then, not every idealist has capital.

In any case, it’s worth trying to understand the complexities of getting “where you need to be” on public policy, even when taxing wealth.


D.J. Tice is at Doug.Tice@startribune.com.