(The Center Square) – Favorable tax codes lead wealthy taxpayers to change where they live, the National Taxpayers Union Foundation says in a recent report for calendar years 2020 and 2021.
Citing IRS data, the analysis said Florida, Texas and North Carolina gained the wealthiest taxpayers from other states. California, New York and Illinois were biggest losers.
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Per capita, the report says Utah and Wyoming were best at gaining wealthy taxpayers and Washington lost people “at alarming rates.”
“It is intuitive enough that the movements of the wealthiest Americans are the most impactful when it comes to the effect on states’ economies, but this data underlies just how impactful those movements are,” says the conclusion from Andrew Wilford, director of the Interstate Commerce Initiative at the foundation. “States that manage to set themselves up as preferred destinations for wealthier Americans will benefit, while states that are blithely accepting the out-migration of the wealthy as an unfortunate byproduct of higher taxes are steadily undermining their tax bases.
“The relationship between a state’s top tax rate and its attractiveness to wealthy taxpayers is also clear. Few things guarantee an exodus of taxable income from a state quite like increasing taxes on the wealthiest taxpayers, while a more favorable tax environment can prove a powerful tool for a state seeking to enlarge its tax base.”
No state increasing tax rates since 2021 ranks higher than those cutting taxes in the same time, the report says.
“What’s more,” the analysis says, “many of the states that perform well in high income-earner interstate migration that had higher top tax rates in 2021 have since significantly cut rates, indicating either that wealthier individuals anticipated tax cuts or that states have sought to keep their new arrivals by reducing tax burdens.”