Do people consider taxes when they decide where to live?
While the Utah Taxpayers Association might be a little biased, we believe the data proves that, on a macro level, it definitely is a major factor. A careful study of migration patterns throughout history paints a very clear picture of the consequences of good tax policy and bad tax policy.
This migration pattern is especially evident among high-income individuals. They are especially sensitive to tax increases, and with the brave new world of a mobile workforce, this sensitivity is on the rise. For many, it can simply mean packing up the laptop and renting a U-haul within a few weeks. With many large and small employers allowing remote workers to locate wherever they see fit, the link to an office location is becoming even weaker.
Before dismissing high-income individuals it is important to study the facts. As the Taxpayers Association is involved in tax policy conversations all over the state, we often feel the need to ask policymakers this important question: “who do you think is going to pay for all of your brilliant ideas?”
The fact is that virtually all of the overall tax burden is paid by high income individuals and businesses. For example, according to IRS data, in 2021 on the federal level, taxpayers with AGI (adjusted gross income) of $200,000 or more made up a mere 7% of tax returns. However they paid 68% of total federal income tax collections, generating more than $1.5 trillion in revenue to government coffers. Taxpayers with AGI of $1 million or more paid 37% of total federal income tax while only constituting 0.5% of tax returns. In other words, those earning over $200,000 pay virtually all of the federal income taxes collected. This pattern holds true for taxes on the state level as well. In Utah, taxpayers making more than $150,000 per year make up only 9.37% of tax returns, but that group pays over 50% of all state income taxes.
How states treat taxpayers, especially high income taxpayers and businesses, has dire consequences over time.
This chart from ALEC (American Legislative Exchange Council) shows the migration of total AGI over a 20 year period among the various states. As can be seen from the data from 1997 to 2017, high tax states like New York, Illinois, Michigan, Ohio and New Jersey and others saw a massive loss in tax revenue. While state tax policy targets and punishes taxpayers that make up the bulk of those actually paying tax, those taxpayers just pack up and leave.
Thankfully, most elected officials in Utah formulate and promote good tax policy that makes sure Utah continues to be the economic leader that it has been for a long time. The Utah Taxpayers Association encourages voters to support those that “get it” and shun those that don’t.