Various states continue to pursue self-destructive policies by driving out innovators and investors with excessively high taxes. Even though many people have warned policymakers not to resort to these harmful taxes, and Economic theory has long warned against punitive taxation, elected officials continue to harm themselves.
Recently, a “millionaire’s tax” in the state of Massachusetts reportedly caused more than $4 billion in revenue to disappear as people fled the state.
Pioneer Institute reports He said the 4% tax addition on incomes over $1 million caused thousands of productive workers to leave Massachusetts.
In 2023, the first full year in which the new tax becomes actionable, 7,582 applicants ages 26 to 35 left the state. In total, Massachusetts loses 16,464 net tax filers and 29,870 net individuals in 2023.
To quote the report:
“Massachusetts’ net AGI loss to other states increased from approximately $900 million in 2012 to $4.18 billion in 2023; This represents an increase of 467 percent over the past decade. In Florida and New Hampshire alone, the state lost $2.75 billion, a 5x increase in AGI. The Bay State has lost a net total of $14.8 billion since 2020. “The persistence and scale of these losses point to structural competitiveness challenges for the Commonwealth.”
Massachusetts Republican Governor candidate Brian Short Sleeve commented:
“Massachusetts is losing its future. Young workers are leaving, high-income earners are leaving, and $4.18 billion in revenues walked out the door in 2023. This didn’t happen by accident. This is the result of bad policy: higher taxes, higher costs, and zero accountability. You can’t tax your way to growth while people are packing up and leaving. When I’m governor, we’ll turn this around by cutting costs, rebuilding the tax base, and making Massachusetts a place for people to stay, not run.”
Massachusetts has long been labeled a high-tax state (sometimes disparagingly referred to as “Taxachusetts”), with a flat 5% tax on all income that rises to 9% on earnings over $1 million. There is also a 12% tax on long-term capital gains. A state like Florida has neither an income tax nor a capital gains tax. The Sunshine State is currently working to eliminate property taxes for residents. It also operates with a budget surplus.
Of course, some residents moved to New Hampshire, another state known for having no income tax.
High taxes on income and capital gains deter entrepreneurs and investors.
Although Massachusetts is home to many leading higher education and research university institutions, no jurisdiction can take competitive advantages for granted, as people will eventually wise up and move elsewhere. In 2024, 27,500 people left the state. Although Florida’s population is larger, 574,000 people moved to the state due to low taxation, great weather, and effective state government.
