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

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

Innovation Reduction Act: Price Controls’ Prescription for New Therapies

0 Comments

January 31, 2023

Joe Selvaggi talks with Pioneer Institute’s senior fellow Dr. Bill Smith about the changes to drug pricing laws included in the recently passed Inflation Reduction Act provisions and discuss who wins and loses as drug companies announce their response to new law.

Award-Winning UK Author & Filmmaker Laurence Rees on the Holocaust, Auschwitz, and Remembrance

0 Comments

January 27, 2023

To mark International Holocaust Remembrance Day, Laurence Rees, a former head of BBC TV History Programmes and author of The Holocaust: A New History, sheds light on Germany in the 1920s and 1930s and the cultural and political conditions that led to the Holocaust.

The Debate Over Rent Control Re-Emerges Amid Housing Crisis

0 Comments

January 26, 2023

There is a housing crisis in the Bay State, a fact unlikely to…

D.C.’s Kevin Chavous on National School Choice Week

0 Comments

January 25, 2023

This week on The Learning Curve, Cara and Gerard talk with Kevin Chavous, president of Stride K12, Inc. and a former member of the Council of the District of Columbia, on the growing movement toward school choice in education. Chavous discusses recent Supreme Court rulings and the expansion of school choice programs, education savings accounts, and vouchers.

Introducing the Newest Members of Pioneer Institute’s Board of Directors

January 25, 2023

New Members: Michael Brown Since joining Battery Ventures…

Residents Rescuing Refugees: Welcoming Ukrainians Yearning To Breathe Free

0 Comments

January 24, 2023

Host Joe Selvaggi talks with George Mason Law Professor, author, and immigration expert Ilya Somin about the newly announced Welcome Corps program which empowers Americans to sponsor and help relocate refugees from Ukraine and other places of war and persecution.

Pioneer Institute Mourns the Passing of Tom Birmingham

January 21, 2023

We at Pioneer Institute mourn the loss of Tom Birmingham even as we are thankful for having had the opportunity to get to know this kind and brilliant man when in office and later, when he spent several years as Pioneer’s distinguished senior fellow in education.