(The Center Square) – A new study shows that wealth is leaving Massachusetts at an alarming rate.
Pioneer Institute released its new study Monday illustrating how out-migration of wealth in the Bay State has quintupled from 2012 to 2021. The public policy group said Massachusetts residents who earn $200,000 or more annually and are responsible for 60% of the state’s lost wealth have been moving away from the state faster since the beginning of the COVID-19 pandemic.
According to a release, the study used IRS data to show how Massachusetts rose from ninth to fourth among states losing population, trailing California, New York and Illinois.
“Net out-migration has nearly quintupled, and the largest spike in departures occurred in 2020 and 2021, as remote work took hold and most other states were cutting taxes,” said Pioneer Executive Director Jim Stergios, who coauthored Tax Reality Sets In with Mary Connaughton and Eileen McAnneny. “Massachusetts’ inattention to tax and competitiveness policies is leading to a tsunami of departures.”
Connaughton spoke of the effect of taxation on out-migration.
“For three decades, political leaders prioritized tax stability, and the state shed the derisive ‘Taxachusetts’ label,” Connaughton said. “Now that we’ve strayed from that path, people and wealth are leaving in droves.”
According to the study, Massachusetts’ adjusted gross income out-migration rose to $4.3 billion in 2021, up from more than $900 million in 2012.
In the report, the authors said remote work and a “massive shift” in tax policies that were put in place by the federal government and states were key factors for the uptick in people leaving Massachusetts.
According to the study, a survey conducted by McKinsey in 2022 reflects that 58% of employees in the country have remote work options. Plus, those employees are likely to seek places with a lower cost of living.
Tax relief created by the 2017 Tax Cuts and Jobs Act allowed a $10,000 limit, according to the study, on the federal deductions for state and local taxes paid; thus, states with noncompetitive tax policies were laid bare as people changed where they decided to live.
Over the past two years, according to the study, 43 states offered tax relief in various forms. However, Massachusetts raised income taxes as 21 other states made reductions.
According to the study, Massachusetts has primarily ignored “new tax realities” and the rise in remote work in several ways. Massachusetts and Oregon remain the only states with a $1 million threshold for the estate tax, as 33 other states do not have that tax.
According to the study, the November 2022 voter ratification of the millionaire’s tax “will likely further quicken the departure of residents and wealth.” In 2019, the top 1% of taxpayers paid 23% of the state’s income taxes and is expected to “drive that number higher.”
In 2021, the lost wealth in Massachusetts, which came in at roughly $2.6 billion, was culled from taxpayers whose earnings were more than $200,000 per year. The study reveals that the acceleration of lost revenue began in 2020 and worsened in 2021.
The report’s authors indicated that state leaders should focus on the most onerous taxes, such as reducing capital gains taxes, S corporations’ tax treatment, and other pass-through entities to stem the tide.
Originally published by The Center Square. Republished with permission.
For more from Budget & Tax News.
For more public policy from The Heartland Institute.
