Report Challenges “Non-Existent Exodus” of High Earners

Massachusetts had one of the lowest rates of wealthy residents decamping for other states in the 2010s, according to a new report from a left-leaning think tank that argued it would be “misguided” to pursue tax cuts for wealthier households “to stem a non-existent exodus.”

The Massachusetts Budget and Policy Center published an analysis Thursday finding that 40 other states lost a higher share of households with income above $200,000 between 2011 and 2020, including several states that impose no income tax at all.

Only Nebraska, South Dakota, Iowa, Louisiana, Alabama, Minnesota, Michigan, Texas and California had a lower rate of out-migration for high-income households than Massachusetts, according to the MassBudget report that’s based on a forthcoming Center on Budget and Policy Priorities review of IRS data.

Report author Kurt Wise said that trend indicates that policymakers should rethink the prospect of tax cuts for higher earners and instead focus on ways to support Bay Staters lower on the income ladder.

“Only a very few high-income households move to avoid higher state taxes. Thus, tax cuts for the rich would be a costly and ineffective ‘solution’ to a problem Massachusetts does not have,” Wise, a senior policy analyst for MassBudget, wrote. “To the extent that Massachusetts faces challenges with population growth, the solutions lie in addressing the struggles of low- and middle-income households, both those currently living in Massachusetts and those that would like to move here.”

The total population in Massachusetts shrunk by nearly 8,000 people between July 2021 and July 2022, driven in part by a net outflow of more than 57,000 people who relocated to other states. Policymakers described those statistics as worrying and view them as contributing to a labor shortage that continues to strain employers.

Gov. Maura Healey has proposed a nearly $1 billion tax relief and reform package that would combine breaks and credits for seniors, renters, caregivers and parents with business-backed changes to the estate and short-term capital gains taxes. House Democrats are expected to unveil their own plan next week.

The Tax Foundation ranked Massachusetts 46th on its business tax climate index, a drop from the mid-30s rank the Bay State previously held.

“An important factor for many families in deciding where to live is affordability — especially for major expenses like housing, childcare, and education. Addressing these challenges will require sustained public investment in things like affordable housing, commuter rail service to new housing markets, affordable high-quality child care, and ready-access to debt-free higher education,” Wise wrote. “Large tax cuts for a few, very high-income and wealthy households will impede the Commonwealth’s ability to make these and other investments in our people and our overall competitiveness.”