Kennedy and Professor Clausing on Taxes and Moving to Florida: 'It's a Rational Economic Move' (April 18, 2023)

On April 18, 2023, the Senate Budget Committee, chaired by Sen. Sheldon Whitehouse of Rhode Island, held a hearing titled “A Rigged System: The Cost of Tax Dodging by the Wealthy and Big Corporations” [1]. The witnesses were economists Kimberly Clausing of the UCLA School of Law and Danny Yagan of the University of California, Berkeley, who favored higher taxes at the top, and William McBride of the Tax Foundation, who argued against taxing wealth and unrealized gains [1][2]. Sen. John Kennedy of Louisiana used his time to challenge the idea of taxing unrealized gains and to argue that wealthy Americans move to escape high taxes. This video shows the end of his exchange with Clausing. All quotes below are from the official hearing record, Senate Hearing 118-73 [1].

Key Moments

”Should any American have to pay tax on unrealized gain?”

Kennedy asked Yagan whether gains on assets that have not been sold should be taxed. Yagan said the “ultra-wealthy who have liquidity” should “prepay some taxes” that would otherwise come due at sale, gift or death, and said the threshold in the billionaire minimum income tax was “$100 million of wealth or more.” “Why can’t you economists answer questions?” Kennedy said at one point. McBride said the approach was “completely untested.” Asked how Europe’s wealth taxes had turned out, he answered: “Bad. … It resulted in a lot of taxpayers exiting the country,” adding that most European countries that tried them “have rolled them back, including France."

"Why do y’all want to punish wealthy people?”

“Why do you and Dr. Yagan, why do y’all want to punish wealthy people?” Kennedy asked Clausing. “We’re not interested in punishing anyone,” she said. “We believe in this country that those with the greater ability to pay should pay more of the burden.” Kennedy then asked why “so many wealthy people are leaving New York City.” “I can’t speak to why particular people are leaving,” Clausing said. “I can tell you why, it’s taxes,” Kennedy replied. “Some of it’s crime, but most of it is taxes."

"It’s a rational economic move, is it not?”

Whitehouse objected that migration is “a two-way street.” Kennedy answered that “people are leaving high tax states and moving to low tax states,” and Clausing replied that “people have different preferences” and that immigrants often settle in the same high-tax places. Kennedy then offered a hypothetical: if Whitehouse won $10 million in the lottery, he would “at least consider … moving to Florida, because they don’t have a state income tax.” “For the record, no I wouldn’t. Never crossed my mind,” Whitehouse said. “When you’re liquid and you don’t have to pay a six percent off the top versus zero percent, it’s a rational economic move, is it not?” Kennedy asked. “Yeah, I agree it’s rational,” McBride said; taxes “are a cost or price,” and prices matter. He added that “claiming that this cost or price doesn’t matter is essentially throwing out the very basic law of demand basics, the basic fundamental idea in economics that prices matter, that cost matters.” [1]

“See, this is what this always boils down to and there’s no—there’s no way we’ll ever agree, okay? But at least two of you believe that government, all things being equal, can spend a dollar better than people can. And that’s your—this is America. You can believe that,” Kennedy said. “For the record, that’s not in their testimony.” Whitehouse objected [1].

“I think people can spend a dollar better, all things being equal, and all you have to do if you know the history of government, you know that I’m right. But I don’t expect you to agree with me, because you’re professors, okay? Thanks Sheldon,” Kennedy said. “Always entertaining,” Whitehouse replied [1].

Background: The Billionaire Minimum Income Tax

The proposal Yagan referred to was in President Biden’s budgets. The Treasury Department’s explanation described a minimum tax on “total income, generally inclusive of unrealized capital gains,” for taxpayers with wealth “greater than $100 million,” with the payments treated as a prepayment against later taxes on realized gains [3]. Congress never enacted it [4].

Fact Check

“People are leaving high tax states.” Supported by recent Census data, with limits. Between 2023 and 2024, California (−239,575) and New York (−120,917) had the largest net domestic migration losses, while Texas, North Carolina and South Carolina had the largest gains [5]. These population estimates do not show why people moved, so they do not settle how much taxes mattered compared with housing costs, jobs or crime. Florida’s own gains also slowed sharply, from 310,892 in 2022 to 22,517 in 2025 [6].
Europe’s wealth taxes were “rolled back.” Largely accurate. According to the OECD, 12 of its member countries levied individual net wealth taxes in 1990, but only four did in 2017: France, Norway, Spain and Switzerland. The OECD said repeals were often justified by efficiency and administrative concerns and by the taxes’ failure to meet their redistributive goals [7].
Florida has no state income tax. Accurate. Article VII of Florida’s constitution bars the state from taxing the income of residents who are natural persons, apart from a narrow exception tied to federal tax credits [8].

What Happened Next

The constitutional question: On June 20, 2024, in Moore v. United States, the Supreme Court upheld a one-time tax on Americans’ shares of undistributed foreign corporate income, 7–2. But it decided only “the precise and narrow question” of taxing realized income attributed to shareholders. On whether income must be realized before it can be taxed, which matters for taxing unrealized gains, the majority wrote: “Those are potential issues for another day, and we do not address or resolve any of those issues here” [9].