Free Daily Headlines :

  • COVID-19
  • Vaccine Info
  • Money
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Vaccine Info
    Money
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

Study says concerns about ‘tax flight’ by wealthy are unfounded

  • by Keith M. Phaneuf
  • September 9, 2011
  • View as "Clean Read" "Exit Clean Read"

The longstanding claim that tax hikes will drive people out of Connecticut was quick to resurface earlier this year as politicians and special interest groups reacted to more than $1.6 billion in state and municipal increases ordered by the legislature and Gov. Dannel P. Malloy.

But a new study by a Washington, D.C.-based fiscal policy research group concluded that tax hikes have little effect on migration. The analysis prepared by the Center on Budget and Policy Priorities also found that poor public education and a lack of affordable housing–problems that can be worsened by levying too little in taxes–were more likely to drive residents to another state.

“Attacks on sorely needed increases in state tax revenue often include the unproven claim that tax hikes will drive large numbers of households–particularly the most affluent–to other states,” center researchers Robert Tannenwald, Jon Shure and Nicholas Johnson wrote. But “the effects of tax increases on migration are, at most, so small that states that raise income taxes on the most affluent households can be assured of a substantial net gain in revenue.”

Citing migration research from the Journal of Economic Perspectives, the study notes that just 1.7 percent of U.S. residents moved from one state to another annually between 2001 and 2010, and only about 30 percent of U.S. natives change their state of residence over their entire lifetime.

Numerous academic studies of migration trends “make clear that people move for many complicated, interrelated reasons,” the report continues, noting that moves within a community or metropolitan area are much more common than migration across several state lines. “It takes a lot to get someone to move a long distance.”

Those that do make such journeys, the study reported, generally do so for larger economic motives than tax hikes, such as a new job or much cheaper housing.

The difference between tax burdens, once local and state taxes are taken into account, typically varies by just a few percentage points across state lines. For example, the average state-and-local tax burden on a middle-income family ranged in 2007 from 11 percent in states with higher taxes to 6.7 percent in states with low burdens.

“In contrast to the small tax benefit from relocation, moving in search of cheaper housing can have a far bigger payoff,” the report states.

“We don’t claim that (affordable housing) is the only factor” behind where people choose to live, David Fink, policy director for Partnership for Strong Communities, a Hartford-based nonprofit, said Wednesday. “But it’s the single-largest factor.”

Fink said that since 2000, Connecticut has ranked 48th out of 50 states in terms of new housing units built per capita. And with housing prices and rental costs here remaining high, this has contributed to the lack of population growth in Connecticut over the past decade.

Florida is typically cited by tax critics in Connecticut as a population destination because  it still lacks an income tax. But migration into Florida slowed in the middle of the last decade as housing prices rose and has reversed itself since 2008 as the economy collapsed, the study says.

A study by Stanford University sociologists of the 2004 New Jersey state income tax increase on households earning more than $500,000 found that while net migration of this group increased afterward, so did the migration rate of filers within incomes between $200,000 and $500,000 — by nearly the same amount.

The Stanford study estimated 70 filers earning more than $500,000 left New Jersey between 2004 and 2007 because of the tax increase, costing the state $16.4 million, while the revenue gain to New Jersey over those years was $3.77 billion.

“These departing ‘uber-rich’ were so few in number that their out-migration barely affected the revenue gain,” the Center on Budget and Policy Priorities wrote. “Policymakers and members of the media should be cautious, therefore, in drawing conclusions from anecdotal evidence of tax-induced flight.”

But the top House Republican on the Connecticut legislature’s tax-writing committee said the center’s report ignores other tax-hike-driven changes that ultimately force people out of state.

Companies routinely weigh tax hikes heavily when deciding not to create jobs, or to relocate them to facilities in other states, Rep. Sean Williams of Watertown, ranking member on the Finance, Revenue and Bonding Committee, said.

And while the center’s methodology might conclude many people left Connecticut to pursue other work, there’s a good chance that tax policy was behind both the jobs found out of state and the work that couldn’t be found here.

“We’re seeing it every day: the quality and quantity of jobs that are leaving the state, and the quality and quantity of jobs that are entering the state,” he said.

“There are a lot of things that affect whether people leave Connecticut,” he said, adding that just because a job change is cited as driving factor behind migrations “doesn’t mean we did the right thing in passing one of the largest tax increases in state history.”

Williams and his other Republican lawmakers opposed the $1.6 billion in state and municipal tax hikes that Malloy and his fellow Democrats in the legislature’s majority used to help close the $3.67 billion deficit built into the 2011-12 fiscal year.

The linchpin of that tax plan, an across-the-board income tax hike designed to raise nearly $900 million extra this year, fell particularly hard on small businesses, added Joseph F. Brennan, senior vice president of the Connecticut Business and Industry Association.

Many small businesses report their profits through the income tax rather than the corporation levy, Brennan said, noting that those with incomes of more than $700,000 paid the new top rate, 6.7 percent, on all of their earnings.

“Those tax increases mean there’s less money for business investment,” he added. “It’s hard to believe it has no significant impact.”

Rep. Patricia Widlitz, D-Guilford, co-chairwoman of the Finance committee, said she believes Democrats carefully balanced tax hikes needed to help close the deficit with their impact on the economy.

The potential for tax hikes to encourage migration” is a factor that we certainly discussed,” Widlitz said, adding that lawmakers also were concerned about the need to stabilize the budget and protect crucial program areas like education and health care. “We have a very high quality of life here, some good services and a beautiful state with many natural resources. … I think people tend to look at the whole package.”

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Keith M. Phaneuf

SEE WHAT READERS SAID

RELATED STORIES
‘It’s a nightmare:’ A growing number of seniors are unable to book vaccine appointments as problems mount
by Dave Altimari and Jenna Carlesso

The state acknowledged Friday in an email to local health workers that some residents are waiting days for a callback.

Panel recommends small, inflationary pay hike for state officials
by Keith M. Phaneuf

Connecticut's part-time legislature hasn't received a pay hike since 2001. The annual base-pay for senators and representatives is $28,000.

Police task force seeks wider applicant pool for watchdog role
by Kelan Lyons

The task force sent four recommendations — and two that didn't get unanimous approval— to lawmakers for the 2021 session.

Miguel Cardona, who are you?
by Ann Policelli Cronin

When I ask Connecticut teachers about Miguel Cardona, those who know him or have worked with him say that he is really nice guy who knows what the challenges in our classrooms are, knows how to help teachers to improve their teaching, and respects public schools. All good. But what is his vision for teaching and learning that he will bring to the U.S. Department of Education?

Connecticut needs a strong two-party system, this Democrat says
by Edward Marcus

J.R. Romano’s recent resignation as the state’s Republican Party chair has brought into focus the need for a viable opposition party in Connecticut. It is not healthy politics when everything is totally controlled by one party:  the legislature, the governorship, and most of the major municipalities in our state.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion Miguel Cardona, who are you?
by Ann Policelli Cronin

When I ask Connecticut teachers about Miguel Cardona, those who know him or have worked with him say that he is really nice guy who knows what the challenges in our classrooms are, knows how to help teachers to improve their teaching, and respects public schools. All good. But what is his vision for teaching and learning that he will bring to the U.S. Department of Education?

Opinion Connecticut needs a strong two-party system, this Democrat says
by Edward Marcus

J.R. Romano’s recent resignation as the state’s Republican Party chair has brought into focus the need for a viable opposition party in Connecticut. It is not healthy politics when everything is totally controlled by one party:  the legislature, the governorship, and most of the major municipalities in our state.

Opinion Connecticut’s $100 million college shell game
by Stephen Adair

The plan to consolidate the 12 community colleges in Connecticut into one college with 12 campuses is called “Students First,” which is ironic because it does not fund students first.  It funds a new administration in a new, statewide bureaucracy. The Board of Regents (BOR) and the Connecticut State Colleges and Universities (CSCU) system office […]

Opinion Inconsistent television captioning is a barrier to equal access
by Jeffrey Bravin and Barbara Cassin

Our world long ago entered the age of the 24-hour news cycle, and a full understanding of the “who, what, when, where and why” of the news is critical for deaf, deafblind and hard of hearing citizens. Yet, Connecticut’s inconsistent quality of television captioning locks our community out of the complete sense of what is happening.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO