Various states continue to pursue self-damaging policies by chasing away innovators and investors with excessively high taxation. While many have warned policymakers against pursuing these harmful taxes, and Economic theory has long warned against punitive taxation, elected officials continue to do self-harm.
Recently, it has been reported that a “millionaire tax” in the state of Massachusetts has chased over $4 billion in income away as people flee the state.
The Pioneer Institute reports that a 4% tax addition on incomes over $1 million has caused thousands of productive workers to leave Massachusetts.
In 2023, the first full year the new tax became actionable, 7,582 filers aged 26 to 35 left the state. In total, Massachusetts lost 16,464 net tax filers and 29,870 net individuals in 2023.
To quote the report:
“Massachusetts’ net loss of AGI to other states grew from roughly $900 million in 2012 to $4.18 billion in 2023, representing a 467 percent increase over the past decade. To Florida and New Hampshire alone, the state lost $2.75 billion in AGI, a 5-fold increase. The Bay State has lost a net total of $14.8 billion since 2020. The persistence and scale of these losses signal structural competitiveness challenges for the Commonwealth.”
Massachusetts Republican candidate for Governor Brian Shortsleeve commented:
“Massachusetts is losing its future. Young workers are leaving, high earners are leaving, and $4.18 billion in income walked out the door in 2023. This didn’t happen by accident. It’s the result of bad policy: higher taxes, higher costs, and zero accountability. You can’t tax your way to growth while people pack up and leave. When I’m governor, we reverse it by lowering costs, rebuilding the tax base, and making Massachusetts a place people stay, not escape.”
Massachusetts has long been labeled a high-tax state (sometimes derogatorily called “Taxachusetts”), with a 5% flat tax on all income that jumps to 9% on earnings over $1 million. It also has 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 have simply moved to nearby New Hampshire, another state that is known for not having an income tax.
High taxes on income and capital gains tend to deter entrepreneurs and investors.
While Massachusetts is home to many prominent institutions of higher learning and research universities, no jurisdiction can take competitive advantages for granted, as people eventually wise up and move elsewhere. In 2024, 27,500 people left the state. While Florida has a larger population, 574,000 people moved to the state – mainly due to the low level of taxation, great weather, and effective state government.