The Rich Are on the Move
Democrat-controlled states are chasing the wealthy out by continuously raising income tax rates.
Democrats and other leftists love to levy tax increases, especially on affluent Americans, all in the name of “fairness.” As Bernie Sanders loves to say, “it’s time for the rich to pay their fair share.” Thus, high earners living in the bluest states experience some of the nation’s highest tax rates. But the reality is, economically speaking, Democrats are endlessly cutting off their nose to spite their face.
Between 2012 and 2015 the states of New Jersey and Connecticut saw a net loss of $8.5 billion and $6.2 billion, respectively, in adjusted gross income. For Connecticut that loss was 4% of the state’s total income. Over that same time period Illinois experienced a loss of $13.6 billion AGI. Meanwhile, the no-income-tax state of Florida experienced a $39.3 billion gain in AGI. What was happening? Two things: taxes and moving trucks. In recent years all three of those blue states sought to increase state revenue by bilking the wealthy and raised the top income tax rates. As a result, many of those states’ high income earners chose to keep more of their hard-earned money and left for tax friendlier pastures.
For example, in 2009 Connecticut raised its top tax rate from 5% up to 6.5%. A few years later, it raised the rate again to 6.7% and then 6.99%. Connecticut’s AGI outflow went from $500 million in 2007 up to $1.6 billion in 2015. Similarly, from 2012 to 2015 New Jersey raised its top tax rate from 6.37% up to 8.97% and saw an average of $2.1 billion in AGI leave the state; twice as much as was seen between 2000 and 2003.
Obviously, this is all money lost to these state government coffers, but in more than just tax revenue. The exit of high income earners has contributed to slowing down GDP growth. Between 2011 and 2016 Connecticut saw only 0.2% growth, while Illinois and New Jersey didn’t fare much better at 1% and 1.2% respectively.
The truth is that a tax hike on the wealth will prove to have an impact on everyone. And more often than not, its impact will prove to be more negative than positive.