A new national report confirms that raising taxes on the super rich DOES NOT lead them to sell their homes, pull their kids out of school and leave their communities in order to seek a new life in a state with marginally lower taxes. Here is a link to the report: CBPP link to report.
Lest we forget, last February, when Governor Malloy rolled out his proposed state budget, a debate arose concerning the fact that Malloy’s tax plan placed a significantly greater burden on middle class families while leaving the super-weather relatively untouched.
Here in Connecticut middle class families pay about 10 percent of their income in state and local taxes. The poor pay about 11 percent and the state’s super rich pay just 4.9 percent of their income in state and local taxes.
At the time Malloy explained that he didn’t want to drive Connecticut’s super wealthy out-of-state. Pointing to the tax rates in New York City, New York State and New Jersey the Governor said that Connecticut would lose its competitive edge if it continued to raise the top income tax rate on the state’s wealthiest residents.
A favorite topic of the Wall Street Journal, who had earlier published an editorial warning states not to raise taxes on the super rich published an article titled “Are High Taxes Driving the Rich Out of Connecticut.” A “think-tank” created by former gubernatorial candidate Tom Foley also put out a report, with no credible data to back up their statements, that higher income tax rates on the rich would lead to “killing the golden goose.”
While Governor Malloy’s tax proposals were thankfully modified during the Legislative Session in order to reduce some of the added burden on Connecticut’s middle income families, the wealthy remained, for the most part, untouched by the Democrat’s tax plan.
In a year in which the state’s super rich were pocketing an extra $154,000 a year - thanks to the extension of the Bush tax cuts - Connecticut ended up asking these same residents for only about $11,000 more a year in state income taxes.
Now that the dust has settled a bit a new study by the Center on Budget and Policy Priorities has determined that raising the tax rate on the super rich has little to no impact on their migration behaviors.
The report, called “TAX FLIGHT IS A MYTH - Higher State Taxes Bring More Revenue, Not More Migration” – explains that "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."
After reviewing numerous studies on the subject, The Center on Budget and Policy Priorities concluded that there is simply no evidence that increasing marginal rates on the super rich lead them to move away.
The super rich, just like most people, choose to live someplace for a variety of reasons and while taxes are understandably a consideration, the types of tax changes that have been discussed are simply not important enough to overshadow the other reasons to stay in Connecticut.
Of course, Connecticut’s legislative Republicans immediately dismissed the report saying that they just know higher taxes will force the rich to move away.
Reality be damned.
As Greenwich State Representative Lile Gibbons put it last year, if we raise taxes on the super rich “People just aren’t going to stay” in Connecticut.
So in the end the question for policy makers is will they going to believe the evidence or the rhetoric. When it comes to the wealthy versus the rest of the state, taxes at the state and local level are painfully regressive.
This year, as in the past, elected officials have backed away from the concept of implementing a truly progressive state and local tax structure.
Heck, even the notion of requiring the super rich to pay the same share of their income in taxes as the rest of us pay seemed repulsive to our elected officials.
This new report, along with previous ones, makes it very clear.
Asking Connecticut’s wealthy to pay their fair share will not result in their fleeing the state.
What is will do is produce a significant amount of revenue that, in turn, will allow our state government to maintain vital and essential services.
Furthermore, it will also make the concept of “shared sacrifice” a little more true.
Almost nine months ago to the day I wrote about this very issue. If you have a moment take a look; http://jonpelto.wordpress.com/2011/01/10/will-forcing-connecticut’s-wealthy-to-pay-their-fair-share-persuade-them-to-leave-connecticut/.