A new annual report from Truth in Accounting found Connecticut has $67 billion in bonded debt and unfunded retirement costs, making it the third most indebted state per taxpayer in the nation. The total debt, which amounts to $50,700 per taxpayer in the state, is based on Connecticut’s 2019 financial ...
Connecticut lost $2.6 billion in 2015 as high-wealth residents moved out
Newly released data from the Internal Revenue Service shows a record loss of high-income tax filers and their families in 2015 following the state’s second largest tax increase.
A total of $2.6 billion in adjusted gross income was lost to other states as Connecticut experienced a net loss of roughly 20,179 residents.
The largest group of tax filers leaving the state were those earning over $200,000 per year. Between 2015 and 2016, Connecticut saw a net loss of 2,050 tax filers who earn more than $200,000 per year, the most since the IRS began tracking that income bracket.
According to the data, 64,381 people moved into Connecticut between 2015 and 2016, bringing an AGI of $3.3 billion.
But during that same period, 84,560 moved out, taking with them an AGI of a little more than $6 billion.
Those in the highest measured income bracket accounted for $2.5 billion in lost AGI, an average of $1.2 million per household.
The IRS data showed that Florida was the top beneficiary of Connecticut’s 2015 loss, gaining nearly 5,000 Connecticut residents with an AGI of $1.8 billion.
California, Massachusetts, North Carolina and Texas rounded out the top five states gaining Connecticut residents.
2015 marked the largest loss of AGI due to out-migration recorded since 2011 when the state’s population began to decline. In 2011, following another major tax increase, Connecticut saw a net loss of 11,491 people, including 692 high-earners, and a total net AGI of $2 billion.
Between 2011 and 2016, Connecticut has lost a net 77,092 people with an adjusted gross income of $8.8 billion.
Suzanne Bates, director of public policy at Yankee Institute and author of the study, “$60 a Second: Connecticut’s Outmigration Problem,” said the new IRS numbers show that despite claims to the contrary, tax increases do have an affect on where people choose to live.
“The 2015 tax increase clearly caused a huge bump in people leaving the state, which is why even Gov. Malloy said we couldn’t keep increasing taxes to fix the state’s budget crisis,” Bates said.
Bates cautioned that there are limitations to the IRS data, particularly that people leave, but their job stays and is taken by someone else who then begins earning the same amount of income.
However, jobs in the high-paying financial industry are becoming more and more portable and Connecticut has already lost some wealthy investors and hedge fund managers to states like Florida.
The loss of residents and income have come on the heels of two of Connecticut’s largest tax increases in 2011 and 2015 and a very sluggish state economy.
Despite the tax increases, state tax revenue has failed to meet expectations, leading to further budget deficits and some calls for more tax increases – particularly on Connecticut’s high-earners – to meet the state’s growing expenses.
Prior studies have shown that the two largest age groups leaving the state are young people fresh out of college and residents who have reached retirement age.
Connecticut’s slow job growth, high taxes and high cost of living drives younger people out of state to find work, while seniors living on a fixed income move to low-tax states to save money.
But the biggest impact on the state’s finances could come from the loss wealthier residents. Connecticut is heavily reliant on top-earners for income tax revenue and small changes in their fortunes – or where they live – can cause big changes in the state’s budget.
Past studies conducted by the state of Connecticut have confirmed the loss of people and income, including a 2017 study by the Office of Policy and Management, which showed a “slight loss” of residents earning over $5 million per year.
“Connecticut has had a steady flow of people leaving the state for decades,” Bates said. “But the pace has increased in recent years — and those years when the increase has been the greatest have been the years directly following large tax increases.”
Although lawmakers were able to reach a budget agreement without a major tax increase this year, the state is already forecasting another large deficit in the next biennium.
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