A study by the American Economic Association, a Non-Partisan Organization, is providing mixed results on states that increased their income tax rates. The report looked at income tax rate increases and the resulting affects over the 110 years from 1900 to 2010.
The study can be found here.
https://www.aeaweb.org/articles?id=10.1257/pol.20210388&from=f
It provides the following results…
1 – When income taxes were raised, state taxes collected increased between 12% and 17% on a per person basis for those who remained in the state.
2 – Wealthier taxpayers had a tendency to leave the state.
3 – This meant that overall, the total tax revenue received remained about the same.
The study’s main finding is that tax increases disproportionately affected poorer taxpayers. Given their economic status most were unable to leave a state that increased taxes.
But wealthier taxpayers left. And they did it because they can.
Let’s also remember that higher income taxpayers pay the equivalent tax of several lower income individuals. Also please realize that when they leave a state, many times they’ll take their businesses and the associated jobs with them, further reducing the tax base and the overall effect of the increase.
The one period of the study that didn’t show a major change was during and after World War II. Given the major upheaval that happened during that period, the researchers found that wealthier taxpayers didn’t leave those jurisdictions for various personal reasons. This was the only time during the period in question where wealthier taxpayers stayed in place.
Let me leave you with this…
Spring has sprung. Looking at the weather, it’s obvious that winter is behind us. Next weekend we’re supposed to have a couple of days in the seventies.
The Cubs are back in Wrigley Field. And I was able to get my 50 year old sailboat in the water and take her for the first sail of the season last Saturday.
It’s time to do some spring cleaning. I’m not just talking about your garage and that basement that’s been driving you crazy for the past couple of years.
I’m talking about your finances. Here’s a couple of ways that you can save some money.
1 – Shop Your Insurance
These prices have skyrocketed in the past couple of years. Doing whatever you can to save money on this vital expense is important.
2 – Eliminate Unnecessary Recurring Expenses
It seems like everything now is a monthly expense. Most of those companies will suck you in with a lower cost offer to get your credit card information.
Then the prices double or triple after the introductory period. Spend some time looking at your credit card bills and discontinue whatever might no longer be necessary.
3 – Leverage High Savings Rates
We’re at a strange time in history when savings rates are much higher than normal. If you don’t have the risk tolerance necessary for investing that excess cash into equities or debt instruments, then let’s put that money into a savings account with a higher interest rate.
Having that money languish in a corporate checking account does nothing but erode your purchasing power given higher prices. Don’t be fooled into believing that inflation is under control.
We aren’t out of the woods yet. If you have any questions, please give me a call.
We’re all going to get through this. Let’s get through it together.
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Sincerely yours,
Chris Amundson
President
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