Welcome to New Hampshire Sign: Live Free or Die
Editorial Staff

Study Warns that New Hampshire Tax Policies Would Exacerbate Impacts of a Graduated Income Tax

/in , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

BOSTON – Drawing on migration patterns between Massachusetts and states like Rhode Island and Tennessee, Pioneer Institute is releasing a study showing a direct correlation between personal income tax rates and household domestic migration patterns between 2004 and 2019. The study suggests that instituting a graduated income tax will shrink the tax base and deter talented workers and innovative employers from coming to and staying in the Bay State.

The analysis is timely given that it comes on the heels of a budget amendment in the New Hampshire state legislature that will eliminate the state’s interest and dividends tax by 2027. The study is the latest part in the Institute’s “Back to Taxachusetts?” white paper series, which analyzes the impacts of a proposed amendment to the Massachusetts constitution that would increase income and long-term capital gains taxes to 9 percent and short-term capital gains to 16 percent for all households and pass-through businesses earning in any year more than $1 million.

“After Tennessee phased out their interest and dividends tax in 2016, we saw a spike in domestic migrants favoring The Volunteer State over Massachusetts,” said Andrew Mikula, author of A Timely Tax Cut: How New Hampshire Tax Policy Changes Could Worsen the Impact of Massachusetts’ Graduated Income Tax. “The stakes are even higher between Massachusetts and New Hampshire because southern New Hampshire is part of Greater Boston’s regional economy.”

The new Pioneer study also examines the impact of historical tax policy changes on migration between Massachusetts and other states in the northeast. New York and New Jersey, for example, both have top tax brackets over $1 million with rates far higher than that of Massachusetts. Net migration trends between Massachusetts and New York have increased taxable income in the Bay State by nearly $200 million annually.

Meanwhile, Rhode Island’s 2011 tax cut, which dropped the top marginal rate on personal income from 9.9 percent to 5.99 percent, seems to have contributed to a reversal in capital flows later in the decade. While moving from Rhode Island to Massachusetts was more common than the inverse for every year between 2005 and 2015, MA-to-RI moves have outnumbered RI-to-MA moves every year since 2016.

The new paper makes it clear that, by motivating shifts in the flow of taxable income into and out of a state, tax policy has serious implications for the growth of the state budget. Between 2008 and 2020, Connecticut’s top marginal income tax rate increased from 5 percent to 6.99 percent, even as Massachusetts’s top rate decreased from 5.3 to 5.0 percent. Over the same period, the state budget grew by 63 percent in Massachusetts, and just 22 percent in Connecticut.

“For the past four decades, Massachusetts’s economic brand of innovation and stable taxes has made the Bay State the strongest private sector job creator in New England and one of the top performing economies nationwide,” said Jim Stergios, Pioneer’s Executive Director. “With state tax coffers awash in federal cash and billions in surplus because of our growing economy, there is no earthly reason to raise taxes and reverse the flow of jobs and wealth. Only ideologues would want to put our healthy economy at risk — now and for generations to come.”

About the Author

Andrew Mikula is a former Economic Research Analyst at Pioneer Institute and current candidate for a Master’s in Urban Planning at Harvard University.

About Pioneer

Pioneer’s mission is to develop and communicate dynamic ideas that advance prosperity and a vibrant civic life in Massachusetts and beyond. Pioneer’s vision of success is a state and nation where our people can prosper and our society thrive because we enjoy world-class options in education, healthcare, transportation and economic opportunity, and where our government is limited, accountable and transparent. Pioneer values an America where our citizenry is well-educated and willing to test our beliefs based on facts and the free exchange of ideas, and committed to liberty, personal responsibility, and free enterprise.

Get Updates on Our Economic Opportunity Research

Related Posts

Smith College’s Carol Zaleski on The Lord of the Rings & Narnia

Prof. Carol Zaleski discusses the literary impact of the Inklings, focusing on J.R.R. Tolkien and C.S. Lewis, exploring their lives, works, and enduring moral contributions in today's cultural landscape.

Boston’s Building Bargain: Coaxing Commercial Conversions to Condos

Joe Selvaggi discusses the strategic goals of Boston's Downtown Office to Residential Conversion Pilot Program with Arthur Jemison, the head of BPDA planning. The aim is to transform underutilized offices in Downtown into vibrant places to live.

Better Civics Education Is the Massachusetts Way

The fight for more comprehensive civics education in the Bay State has persisted for years. The Legislature's recent override of Gov. Maura Healey’s cut to the state’s modest civics instruction budget suggests that in many in Massachusetts — including parents, teachers, and lawmakers — support strengthening the state’s civics and history curriculum, particularly with mounting evidence of declined student performance across the country.

Emily Hanford on Reading Science & K-12 Literacy

Emily Hanford, host of the hit podcast Sold a Story: How Teaching Kids to Read Went So Wrong, discusses the science of reading, the long whole language v. phonics debate, the impact of the digital age on learning, and the importance of academic background knowledge for children becoming better readers.

SCOTUS Wealth Tax: Are Appreciated Assets Income?

Joe Selvaggi talks with CATO Institute constitutional scholar Thomas Berry about the recently argued Moore v. U.S.A. case, which challenges the idea that income must be realized before it can be taxed.

Francine Klagsbrun on Golda Meir’s Leadership and the State of Israel

This week on The Learning Curve, Francine Klagsbrun, author of "Lioness: Golda Meir and the Nation of Israel," discusses the remarkable life and legacy of the woman who left Kiev as a child, grew up in Milwaukee, emigrated to Mandatory Palestine, was a signatory to the declaration of independence for the state of Israel, and rose to become that nation's fourth prime minister.

Busting Big Business: Antitrust Comes for Google and Big Sandwich

Joe Selvaggi talks with Dr. Brian Albrecht, an economists with the International Center for Law and Economics. They separate fact from fiction when it comes to the public’s and politicians’ concerns over allegedly anti-consumer practices of big business and discuss when antitrust action by the federal government is justified.

The Massachusetts Workforce: Abundant Resources, Steep Challenges

Massachusetts features a strong workforce training system with abundant resources yet faces challenges in matching jobs and applicants, training youth, and attracting sufficient numbers of skilled immigrants, according to a pair of studies from Pioneer Institute.