It might seem predictable: A business magazine saying wealthier people are overtaxed and are so distraught they’re relocating. But we don’t hew to any dogma, right or left; we just want to find the facts.
That’s why, in December, we set out to do an objective study on wealth migration—something many of you have told us became a near pandemic after taxes went up in 2013.
We did this by developing a random list of 400 accounting, legal, wealth management, private equity/investment banking, family business consulting and related financial services companies in Minnesota, working primarily off our own database from our years of producing a “Top 25”-type book of lists, as well as our information on current subscribers and recent attendees of our events.
We then created a 16-question survey vetted by accounting, banking, family business and similar professionals, then reviewed by research firm The Morris Leatherman Co. The final questionnaire was mailed to our 400 contacts in mid-January. We sent reminder emails three times, then Morris Leatherman called them, to get as many responses as possible by Feb. 26.
I could go on, but to sum it all up, we carefully conducted a survey within a six-week period that provided us with solid data from 150 of the firms described above and was then analyzed with guidance from Morris Leatherman. The top five contributors by profession were wealth managers, accountants, investment bankers, lawyers and estate planners.
The groundbreaking results are explained on another page, with a few highlights noted here.
More than 20 of you also participated in a personal wealth migration questionnaire. You all said Minnesota’s tax climate is the primary reason you moved or will be moving; four of you moved out years ago. The remaining 17 said you moved or began to move within the last two years. And you’re taking with you more than $25 million in taxable annual income and $601 million in net worth. This amount of wealth exceeds the median levels reported in TCB’s analysis of its wealth migration study.
Notably, two other sources independently support TCB’s findings that billions of dollars a year in taxable income, net worth and gross estate values are leaving Minnesota. As in TCB’s study, these analyses also found that such migration has accelerated in recent years:
This totals four independent sources indicating significant wealth is leaving Minnesota. Each is different, but additive in helping us begin to understand what’s happening.
What moved or began planning to move out of Minnesota within the last two years due to the state’s tax policy and collection practices:
$1.5 billion in annual taxable income
$12 billion in net worth
$22 billion in gross estate value
TCB’s analysis identifies the percentage due to tax policy; the MNCPA data provides a look at one professional services sector’s experiences; and the Center for the American Experiment identifies the net loss (after including incoming wealth) in taxable income.
All only scratch the surface, however. TCB’s study received input from 150 firms out of a universe of thousands. The MNCPA findings are based on input from 114 out of 1,700 members it surveyed. In each situation, surveying a larger portion of each universe likely would have added to the dollars we found are leaving Minnesota. Meanwhile, the Center for the American Experiment’s findings only looked at adjusted gross income.
The reporting around TCB’s study also found that many wealthier Minnesotans, when they move, are now doing so for good and severing all ties here instead of still coming here for up to half the year and contributing to the churches, foundations, hospitals, arts programs and schools they had supported for years. Most, however, are unwilling to be named for fear of state retribution.
They’re also ditching their Minnesota lawyers, family doctors, dentists, bankers and other professional services providers. The amount of lost revenue for these service providers remains unmeasured.
It’s also impossible to determine how much the departing net worth and gross estate values revealed in TCB’s study may affect Minnesota’s future. But I wonder how many of those who are leaving might otherwise have built or continued to build businesses in this community or helped others here develop theirs.
Besides developing our largest employers, such as Cargill, General Mills, Target, Medtronic, Pentair and UnitedHealth Group, our state’s wealthiest citizens historically also backed our once-thriving startup community. They donated and then protected our parkland and lakes in Minneapolis. And they financed our arts and nonprofits, as well as our hospitals, colleges and universities. All of these are why Minnesota consistently ranks high as one of the best places to work and live.
The wealthy of previous generations also had the guts to act, and speak up, when needed. Today’s wealthy who complain in the shadows while slipping out of town give further ammunition to those who say the wealthy just care about themsleves. More need to speak up publicly.
TCB’s wealth migration study is limited in what it shows. But it’s a start, and I hope it helps fuel dialogue and further exploration of this subject—and soon.