February 03, 2021 Taxes driving wealth out of Massachusetts and into Florida
Full article here
Wealthy residents and businesses are leaving the state at a troubling rate — an exodus that could grow now that working remotely is gaining widespread acceptance, a new Pioneer Institute report states.
Massachusetts has seen a net loss of $20 billion to other states, especially New Hampshire and Florida where taxes are much lower, the report warns.
“COVID has dramatically accelerated working from home and that’s bad news for the state,” said Pioneer Institute Research Director Greg Sullivan, who co-authored the report on “Do the Wealthy Migrate from High-Tax States?”
The Pioneer report found wealthy residents have been packing up and moving out of state over the last 25 years, taking with them much-needed taxable income. The report found that some $20.7 billion in adjusted gross income left Massachusetts between 1993 and 2018.
That news hits as Massachusetts’ Democratic lawmakers have proposed a hike in taxes on the rich to bolster funding for education and transit. Another vote, Sullivan says, is expected to come up again this spring.
He warns the post-pandemic economy will see companies be more mobile and searching for the best deals they can — all while employees could be free to choose where they want to live also.
Sullivan cited Tesla as Exhibit No. 1.
Tesla CEO and SpaceX entrepreneur Elon Musk, now considered the richest person on Earth, has moved his base of operations to Texas. He shunned California and its high income tax.
The brain drain from Massachusetts, the Pioneer report states, has resulted in no-income-tax states like Florida capturing 46% of the lost wealth and New Hampshire 26%.
“We saw this trend slow down temporarily during the Great Recession, when people became less mobile,” Sullivan said. “But it’s since come roaring back, and the magnitude is staggering.”
The Pioneer study adds high rates of immigration have bolstered Massachusetts’ economic health and kept its population stable. But that’s not going to help the bottom line forever.
“The legislature needs to be very careful in the new post-pandemic environment, when talent is more mobile,” said Pioneer Institute Executive Director Jim Stergios. “Businesses look at the business climate closely — especially tax issues — when they think about location. I’d hate to see us follow in Connecticut’s footsteps toward economic decline.”
States that have lost taxable income to Massachusetts are in the Northeast, with New York, Connecticut, and New Jersey contributing the most, the report adds. Illinois, Ohio, and Michigan, lost smaller amounts.
But wealth migration out of Massachusetts is a “nightmare scenario,” Sullivan adds, that will only get worse in our “Zoom economy.”