Connecticut lost over 37,000 residents between 2015 and 2016—and they took more than $6 billion in income with them.
It's no secret that Connecticut has been losing residents to other states for some time now.
But the most recent data from the IRS shows those leaving Connecticut are taking with them a lot of wealth, with damaging consequences for the state's tax base.
The Hartford Courant noted in a recent editorial that people who moved out of Connecticut from 2015 to 2016 earned $6.04 billion in adjusted gross income.
People moving to Connecticut during that time arrived with about $3.3 billion in adjusted gross income, according to the IRS.
That's a $2.7 billion hit to Connecticut’s economy in just one year.
Income Tax Losses
That income loss places Connecticut among the top five states in terms of income loss, population notwithstanding.
The Courant noted that Connecticut's income tax generated $6.85 billion in revenue in the 2015 tax year. That's 4.3% of the $161 billion adjusted gross income for all Connecticut residents that year.
Based on that calculation, the exodus of $2.7 billion in income translates into a $100 million income tax revenue loss for 2016.
CBIA has for years implored lawmakers to resist their urge to hike taxes on Connecticut's wealthiest residents because it ends up hurting everyone.
Connecticut must find a way to deal with its crushing pension obligations without taxing the stuffing out of the rich.
"We need to embrace, not chase out, successful people."
Just this past year, lawmakers tried to slap a 19% tax on the state’s hedge fund industry.
CBIA was among many voices urging lawmakers against adopting the tax because it would also hurt retirees and middle-class investors.
Lawmakers eventually stood down, especially after some opponents noted that the 2011 and 2015 tax hikes—two of the largest in state history—failed to end the pattern of massive deficits.
Connecticut's Loss, Florida's Gain
The IRS data shows that most Connecticut taxpayers moved to New York first, with 8,2002 tax returns, and Florida second, with 7,944 returns filed.
What's worse is that the average gross income for those leaving for New York was $111,653, but for those who moved to Florida, it was $253,187.
As the Courant points out, "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."
"Connecticut's financial problems are serious," the Courant noted.
"We have crushing pension obligations, too long ignored. The state must find a way to deal with them without taxing the stuffing out of the rich.
"That is not a guaranteed way to increase income, as the IRS data show."
The legislature's priority in 2018 must be to tackle a problem they've hit the snooze button on for decades.
"Obviously wealthy retirees may move to warmer climes," Gioia said, "but we need to provide a favorable environment here to slow that trend."