Welcome to New Hampshire Sign: Live Free or Die

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

MA Teacher James Conway & High School Grad Ela Gardiner on MCAS Testing

The Learning Curve, co-hosts U-Arkansas Prof. Albert Cheng and Meredith Coolidge of DFER - MA interview James Conway, a World History and Psychology teacher at Revere High School, and Ela Gardiner, a freshman at Hobart and William Smith Colleges and Wellesley High School alumna.

Study Finds Results of International Assessments Confirm Quality of MCAS

Economist and Fulbright Scholar concludes Massachusetts should return to participating in international testing as a benchmark for state results and internationally competitive economy

Vitamin Parents Part 2: Twin Moms Converting a Decent Traditional School Experience Into a “Wow” Homeschool One

This week's episode of Homeschooling Journeys features Andreina, twin sister of Mariana (last week’s interview). Using Education Savings Accounts (ESAs), Andreina funds activities like competitive jujitsu, music lessons at School of Rock, and Surf Skate Science. As a "Vitamin Homeschooler” (Curious Mike’s term), Andreina enhances her children's education through independent learning tasks and family projects. While the kids’ desire for homeschooling serves as the foundation for their motivation, she experiments also with small rewards like a little screen time or chocolate. Andreina also benefits from family support with her twin; Mike observes that formal feedback isn't common in homeschooling, unlike in traditional classrooms.

Edward Achorn on Abraham Lincoln, the Civil War, & Slavery

This week on The Learning Curve, co-hosts Charlie Chieppo and Ret. MN Justice Barry Anderson interview Edward Achorn, a noted writer, historian, and author of "Every Drop of Blood: The Momentous Second Inauguration of Abraham Lincoln" and "The Lincoln Miracle: Inside the Republican Convention That Changed History". Achorn shares insights into Lincoln's improbable political rise and the critical events leading to his 1860 Republican presidential nomination, including his strategic maneuvering following his defeat in the 1858 Illinois Senate race.

Vitamin Parents Part 1: Twin Moms Converting a Decent Traditional School Experience Into a “Wow” Homeschool One

The upcoming episodes of "Homeschooling Journeys" feature twin sisters, Mariana and Andreina, originally from Venezuela and now living in Florida. Each is a mom of two kids. Curious Mike describes them as "Vitamin Homeschoolers"—they see homeschooling as a way to enhance their children's education rather than addressing any major issues with traditional schooling. They discuss the challenges of balancing time and responsibilities but emphasize the benefits of stronger family bonds and the enriching experiences they've been able to provide through Educational Savings Accounts (ESA). Non-homeschoolers often worry about the socialization of homeschooled kids, but Mariana and Andreina have their children socializing a lot—playing in rock bands, competing at a high level in soccer, and attending in-person, unusual academic classes, like Surf Skate Science and competitive extracurriculars.

PRI’s Lance Izumi on The Great Classroom Collapse

Lance Izumi delves into his latest book, "The Great Classroom Collapse: Teachers, Students, and Parents Expose the Collapse of Learning in America's Schools". He discusses why, despite decades of education reforms and vast spending, many American students remain underprepared in critical subjects like reading and math.

Learning From California: Policy Lessons From Golden State Exodus

Joe Selvaggi speaks with Tim Anaya of the Pacific Research Institute about his new book, The California Left Coast Survivor’s Guide, exploring insights and lessons on how Massachusetts can stay competitive.

Is Massachusetts at a Turning Point – 10 Data Points That Give Me Pause

Massachusetts tops the charts in many studies.  Best public…