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

Journalist Bari Weiss on Fighting Anti-Semitism & the Cancel Culture

This week on “The Learning Curve," co-hosts Gerard Robinson and Cara Candal talk with Bari Weiss, former New York Times op-ed editor and writer, and author of How to Fight Anti-Semitism. Bari shares what motivated her to write this book, its reception, and key lessons for teachers and students alike. She also explains why we’re now seeing a rise in anti-Semitism, how educators can best combat it, and the connection she observes between the current upsurge in anti-Semitism and cancel culture.

Happy Holidays from Pioneer Institute!

Wishing you all a warm, safe and joyful holiday season!

Face Masks Lifted: Scientists Weigh In With Comprehensive Efficacy Studies

Hubwonk host Joe Selvaggi talks with Harvard Medical School professor, Dr. Jonathan Darrow, about the observations of his recent paper, Evidence for Community Cloth Face Masking to Limit the Spread of SARS-CoV-2: A Critical Review, in which he examines the range, quality, and scientific observations of mask wearing efficacy studies.

Jeff Farrah on Why We Need a Start-Up Visa

This week on JobMakers, host Denzil Mohammed talks with Jeff Farrah, General Counsel at the National Venture Capital Association, a D.C.-based group that advocates for public policy supportive of American entrepreneurship.

Institute for Justice’s Michael Bindas on the SCOTUS Oral Arguments

This week on “The Learning Curve," co-hosts Gerard Robinson and Cara Candal talk with Michael Bindas, a senior attorney with the Institute for Justice, who represents the lead plaintiffs in the U.S. Supreme Court case, Carson v. Makin.

Building Healthcare Bigger: New Bill Is Good Medicine or Ill-Designed Cost Shift

This week on Hubwonk, host Joe Selvaggi talks with Josh Archambault, Pioneer Institute’s Senior Fellow in Healthcare, about the healthcare provisions in the pending Build Back Better Act and their likely impact on the coverage and cost to Americans in the wake of Covid-19.

Carlos Castro: From Crossing the Border to Owning a Business

This week on JobMakers, host Denzil Mohammed talks with Carlos Castro, president and CEO of Todos Supermarket in Woodbridge, Virginia, a successful business employing more than 200 people. He describes the perilous conditions in his native El Salvador, why he crossed the border to America, and why immigrant business owners tend to hire people like them, in this week’s JobMakers.

Dr. Marc Seifer on Nikola Tesla, Pioneer of the Modern Electrical Age

This week on “The Learning Curve," co-hosts Gerard Robinson and Cara Candal talk with Dr. Marc Seifer, author of the acclaimed biography Wizard: The Life & Times of Nikola Tesla. He reviews what teachers and students should know about the life of Nikola Tesla, the world-renowned engineer, physicist, and inventor who is more widely known nowadays for the electric car and clean energy companies named for him.