Slowest-growing states all have a progressive income tax
The fastest-growing states -- Utah, Texas, Colorado, Nevada and Florida -- either had no income tax or a flat tax policy.
A new study published this month could serve as a dire warning for Democratic presidential hopefuls Elizabeth Warren and Bernie Sanders, both of whom have lobbied for an extensive new tax on the wealthiest Americans.
But according to a study published by Illinois Policy, a conservative nonprofit think tank with offices in Chicago and Springfield, four of the five slowest-growing states over the past decade all have one thing in common: A progressive income tax.
West Virginia, Connecticut, Vermont and Mississippi -- which have a progressive income tax -- all placed in the bottom five in terms of population growth. Over the course of the past 10 years, West Virginia’s population shrunk by 3.3 percent followed by Connecticut at 0.4 percent and Vermont at 0.3 percent. Mississippi grew at just 0.2 percent.
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Conversely, the fastest-growing states -- Utah, Texas, Colorado, Nevada and Florida -- either had no income tax or a flat tax policy. Utah, the fastest-growing, saw its population jump by 15.5 percent from 2010 to 2019. It was followed by Texas, which has no income tax and saw its population expand by 14.9 percent. Colorado, in third, grew by 14.1 percent. Both Nevada and Florida, neither of which have an income tax, experienced 14 percent population growth.
The reason for the exodus, according to the study, is that Americans are choosing to move from progressive income tax states to states that have no income taxes. Nearly 3.2 million Americans have relocated to states without an income tax, while 2.5 million Americans left states with progressive income taxes.
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The outlier among shrinking states is Illinois, which still saw its population decline over the past decade, posting the second-worst growth rate in the country at -1.3 percent, according to the study. (In terms of people lost, it won, with a staggering 168,682 people fleeing the state.)
A shrinking population carries broader ramifications for a state’s economy: Population decline, specifically the loss of prime-age workers, can impede growth in state tax revenue.
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The Illinois Policy Center warned the population shrinkage in Illinois could worsen if a controversial bill proposed by Democratic Gov. J.B. Pritzker and urged voters to reject it. On Nov. 3, voters will cast their ballots on the proposal, which would raise taxes only on people who earned $250,000 or more a year. Incomes between $250,000 and $500,000 would be taxed at 7.75 percent. That would climb to 7.85 percent on incomes from $500,000 to $1 million, while income over $1 million would be taxed 7.99 percent. The package would also raise the corporate tax rate to 7.99 percent.
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“Recent history proves that pursuing further tax hikes won’t solve Illinois’ problems,” Illinois Policy research analyst Bryce Hill wrote. “In the eight years since lawmakers imposed the ‘temporary’ income tax hike of 2011, outmigration has continued and state finances have deteriorated. The Land of Lincoln is now in even worse fiscal condition and saddled with the most debt ever.”
Democrats estimate the proposal would generate $3.57 billion.