Many Wisconsinites Moving to Other States for Tax Breaks

Taxpayer Exodus Could Create Burden on Wisconsin: NCPA/MacIver Report


Source: NCPA

Wisconsin’s high tax rates could encourage many to leave the state, particularly high-income residents who pay the greatest share of taxes, says a new study from the National Center for Policy Analysis and the John K. MacIver Institute for Public Policy.

IRS and Census data from “How Money Walks” show that Wisconsin lost nearly $2.5 billion in income over 20 years due to its residents moving to other states.  Florida ranks first, followed by Arizona, Texas, Colorado and North Carolina.

Calculations in the report show the tax advantages for Wisconsinites who move to the neighboring states of Minnesota, Michigan and Iowa. Illinois is the exception.

“Wisconsin stands to lose millions of dollars a year to other states as people move to reduce their tax burden. The current tax rate is going to create a greater burden on those left behind,” says NCPA Senior Fellow Pamela Villarreal, who authored the study.

There have been a number of changes to Wisconsin’s tax code since 2011, which will save taxpayers nearly $2 billion by 2015.  But compared to its neighboring states — Minnesota, Michigan and Iowa — Wisconsin still has a long way to go.

The study uses the NCPA’s State Tax Calculator to help people determine their tax burden by moving from one state to another.  The State Tax Calculator (www.whynotmove.com), developed by NCPA senior fellow Laurence Kotlikoff, produces results based on the economic theory that households manage their finances so as to smooth out their discretionary spending over their lifetime.

“In all fairness, states such as Florida and Arizona offer amenities such as warmer weather.  But tax burdens could factor in as reasons as well,” said Villarreal.

  • Wisconsinites moving to Florida would gain the most out of the five destination states, with additional lifetime wealth gains ranging from nearly $62,000 for retirees to $223,000 for 40-year old married homeowners.
  • Arizona also provides substantial gains for Wisconsinites, ranging from $19,608 in additional lifetime wealth for a 25-year old single renter to $166,029 for 40-year old married homeowners.
  • Wisconsinites considering a move to Colorado would have up to an additional $175,000 in lifetime wealth; retirees would gain the most out of the five states, with an additional lifetime wealth of $85,221.

Do any of the top five destination states make Wisconsinites worse off?  In most cases, no.  But there are a few exceptions:

  • A 30-year old renter earning $50,000 a year would fare worse in North Carolina, losing about $286 in annual discretionary income and $29,079 in lifetime wealth.
  • A 25-year old renter earning $30,000 a year would nearly break even by moving to Colorado.  
  • A 70-year-old married retired couple moving to Texas would lose $790 a year in annual discretionary income and $28,402 in lifetime wealth.

"With Governor Walker’s recent tax cuts, Wisconsin is heading down the right path. But, this report shows that we have more to do to make the tax climate better for our hard-working taxpayers," MacIver President Brett Healy said. "We simply cannot afford to lose this $2.5 billion to other states. We need a simple, comprehensive tax system that does not push Wisconsinites to move away."

Some of the losses in lifetime wealth can be due to a state’s property tax and sales tax burdens outweighing the income tax burden, as in the case of Texas.   

Lifetime Gain (Loss) to Taxpayers Moving from Wisconsin to Top Destination States

State

25-year old single renter:

$30K annual income

30-yr-old single renter:

$50K annual income 

40-yr-old married homeowners:

$75K annual income

50-yr-old married homeowners:

$100K annual income

70-yr-old married homeowners:

retired

Florida

$75,322

$132,778

$223,735

$202,891

$61,726

Arizona

$19,608

$41,122

$166,029

$163,532

$65,679

Colorado

$4,143

$20,991

$170,252

$174,782

$85,221

Texas

$67,001

$117,187

$62,050

$43,204

($28,402)

North Carolina

($27,644)

($29,079)

$98,075

$105.686

$52,077

 

Calculations in the report also show tax advantages for Wisconsinites who move to the neighboring states of Minnesota, Michigan and Iowa. Illinois is the exception.

Is the Tax Code Driving Taxpayers from Wisconsin?http://www.ncpa.org/pub/is-the-tax-code-driving-taxpayers-from-wisconsin






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