The rich are fleeing Connecticut in droves
Cause and effect. In the case of Connecticut, high taxes are leading to an exodus of wealthy residents, reducing the tax take for a state already struggling trying to balance its budget.
We've seen this in other states, including Illinois, New York, and California. But in Connecticut, the exodus appears to be especially heavy among rich taxpayers, leading to a huge loss in revenue that the state can ill afford.
Legislators who hope to solve the state's budget crisis with ever-higher taxes should pay attention. The data are clear:
Those who moved out of Connecticut from 2015 to 2016 took with them more than $6 billion in adjusted gross income, or AGI. People who moved to Connecticut brought with them only about $3.36 billion in AGI. The total net loss to Connecticut: $2.7 billion. In one year. That was in the top five of all states, regardless of population.
Connecticut realized $6.85 billion in income tax from the 2015 tax year, or 4.3 percent of the $161 billion in AGI reported from all filers. If that same ratio held true in 2016, then the loss of $2.7 billion in AGI would have meant an actual loss of more than $100 million in income tax revenue.
In one year. That doesn't account for all of the problems in a $20 billion budget, but it's a serious dent, and it's indicative of a deep problem: Many of Connecticut's wealthy residents are moving out, and they're taking their money with them.
Legislators, this is strong evidence that taxing residents at high rates is becoming counterproductive.
To that I say, "Duh." It isn't a surprise to anyone - except liberals and 4 year old kids - that there is a level of taxation that becomes unbearable to everyone - including the rich.
The states that poached the most taxpayers from Connecticut were New York (8,202 tax returns) and Florida (7,944). The average adjusted gross income for those who left for New York was $111,653. That's pretty bad, but it's nowhere near as shocking as Florida, where the average return from former Connecticut residents was $253,187 in adjusted gross income.
That means more than $2 billion in income moved from Connecticut to Florida from 2015 to 2016, more than twice as much money as moved to New York.
The French socialist President Francois Hollande learned this same lesson the hard way. His government raised the top tax rate on the rich to 75% only to see thousands of wealthy taxpayers flee the country. The drain was so severe that Hollande eventually rescinded the increase.
High tax states brag that their government services are so much better than less expensive red states. But given the financial and budgetary problems in most blue states, the cost of spending other people's money eventually gets too high.