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

WV State Sen. Patricia Puertas Rucker on Universal School Choice

This week on “The Learning Curve," co-hosts Cara Candal and Gerard Robinson talk with Senator Patricia Puertas Rucker, a West Virginia state Senator and Chair of the Education Committee. Thanks to her leadership, West Virginia now has the widest, most universal education savings account program in America.

Pioneer Institute Statement on the Latest State Audit of the Boston Public Schools

The third review of the Boston Public Schools (BPS) in fewer than 20 years makes clear: Things are getting worse.  Graduation rates are down, achievement gaps are up, an unacceptably large percentage of students attend schools ranked in the lowest 10 percent statewide. In a cruel twist, more than three in five students still are not taught material on which they are tested. There remains no clear strategy for improvement.  

Forsaking Massachusetts’s Miracle: Risking Our Future With Past Mistakes

This week on Hubwonk, host Joe Selvaggi talks with Greg Sullivan, Research Director at Pioneer Institute and author of Back to Taxachusetts?, about the link between Massachusetts’s decision to reduce tax rates and a generation-long economic renaissance - and the reasons why new taxes such as the proposed, so-called "Fair Share Amendment" risk taking us back to economic stagnation or decline.  

Massachusetts Tax Revenues Surpass Pre-Pandemic Levels

0 Comments
/
Pandemic recovery and then some! Massachusetts revenues are higher than anyone was expecting, but where is all the money coming from? And what does this mean for the Massachusetts economy?

Yuliya Tarasava Invests In Americans Who Need It Most

This week on JobMakers, host Denzil Mohammed talks with Yuliya Tarasava, immigrant from Belarus and cofounder and chief operating officer at CNote, a platform that helps facilitate investment in financially underserved communities across America.

Study Documents The Design Challenges, Contracting Issues, And Delays Facing New MBTA Fare Collection System

This new study unearths previously unseen communications between the MBTA and its contractors, showing that the MBTA’s efforts to modernize its fare collection system, including allowing payments with credit cards and bringing “tap and go” technology to Commuter Rail and ferry lines, was riddled with technological challenges and difficulties overseeing contractors as early as 2019, culminating in a 3-year delay to the project’s full implementation.

Columbia’s Prof. Nicholas Lemann on the Great Migration, the SAT, & Meritocracy

This week on “The Learning Curve," guest co-host Kerry McDonald talks with Nicholas Lemann, Joseph Pulitzer II and Edith Pulitzer Moore Professor of Journalism and Dean Emeritus of the Columbia School of Journalism, and author of the books, The Promised Land: The Great Black Migration and How It Changed America, and The Big Test: The Secret History of the American Meritocracy.

Doctors With Borders: Curing Shortages With International Lifeline

This week on Hubwonk, host Joe Selvaggi talks with Cicero Institute’s Jonathan Wolfson about the growing doctor shortage and the potential to alleviate the crisis by tapping the global supply of well-trained physicians eager to find safety and freedom in the US.