* The Tribune with its usual schtick…
Illinois residents are fleeing for more economically hospitable states. They go to Texas, Florida and other Sun Belt states because job prospects are better, tax burdens are lower and the weather is more temperate. The Exodus is real. It’s damaging Illinois. And it may be getting worse.
The warning comes from a fellow sufferer, otherwise known as the governor of New York. Democratic Gov. Andrew Cuomo reports that New York state income tax revenue last year came up short by a projected $2.3 billion. Cuomo partially blames the departure of wealthy residents from his high-tax state in the wake of federal tax reform, which put a limit on the amount of state and local taxes that can be deducted on federal income tax forms.
When New York, already expensive, put an even higher tax burden on residents, some New Yorkers who could afford to leave did so. In Cuomo’s memorable phrase on Monday: “Tax the rich. Tax the rich. Tax the rich. We did that. God forbid the rich leave.”
As of Tuesday we hadn’t seen an estimated 2018 tax revenue figure from Springfield, but a trend’s a trend. There’s reason to anticipate that some affluent, mobile residents of Illinois will reach the same conclusions as their brethren from New York that they’d be better off financially in a different locale. The Wall Street Journal reports that growing numbers of wealthy tax refugees from New York, New Jersey and Illinois are showing up in Miami to buy condos.
* Crain’s New York Business talked to the NY budget office…
In expectation of the [federal tax] change, an untold number of New York taxpayers accelerated income and deductions in the final days of 2017, paying more taxes than the state anticipated so that they could pay less in 2018. Absent that timing-related shift, personal income tax revenue would have risen 4.3% rather than declined, a state budget spokesman said. That suggests the state economy grew stronger last year.
Gov. Cuomo was basically just making a political argument against the Republican tax plan and everyone focused on that, rather than what actually happened.
…Adding… The Tribune claims “As of Tuesday we hadn’t seen an estimated 2018 tax revenue figure from Springfield.” The editorial board should’ve pulled up the latest monthly revenue briefing from COGFA. Here it is…
In January, base monthly receipts decreased $379 million. Regular readers of the Commission’s monthly briefing will recall that last January net income tax revenues spiked $925 million not only due to higher income tax rates, but also to taxpayer behavior related to the federal tax reform package. In essence, taxpayers were incentivized to pay their tax liabilities within tax year 2017 to take advantage of the last year of the SALT deductions—prior to new federal limitations. The timing of those accelerated payments caused a jump in estimated payments collected in January. As a consequence, the comparative decline in this month’s income tax performance is not surprising and was quite solid when viewed through the proper lens. This month had the same number of receipting days as the same prior year period.
While monthly gross personal income taxes fell $393 million, or $340 million on a net basis, that decline needs to be put in context given last year’s record January levels.
* From the Center for Tax and Budget Accountability…
In Illinois, each of the income categories we examined saw net domestic out-migration, meaning more people left Illinois for elsewhere in the US than arrived here from other states. On its own, that’s not surprising: Illinois has had negative overall net domestic migration for nearly a century, even when its population was booming, as we explained in our previous post. (One big reason is that Illinois has long relied on international immigration and new births for its population growth.)
But Illinois’ greatest losses aren’t among those making over $100,000 — not even close. From 2012 to 2016, on average, for every 1,000 people making six figures or more, Illinois lost 4.6 of them to domestic migration each year. In contrast, that figure was more than doubled for people making under $25,000, at 10.6 per 1,000, and hit a substantially higher 9.1 per 1,000 for people making between $25,000 and $50,000.
Indeed, Illinois’ migration losses are least severe in what we might think of as the “middle class” categories, between $50,000 and $100,000.
In other words, most people generally leave when they can’t afford to stay.
* And where have the wealthy Illinoisans been moving to? Well, New York, for one…
The top destination for households making over $100,000 is actually the New York City metropolitan area — hardly a low-tax oasis. Houston is second, with the top six rounded out by Los Angeles (where the top state income tax bracket is 13.3 percent, versus 4.95 percent in Illinois); Minneapolis-St. Paul (where it’s 9.85 percent); Denver (4.63 percent) and Washington, DC (8.95 percent). Only then do we reach northwest Indiana, in seventh place.
Overall, high-income Illinoisans’ top out-of-state destinations are a mix of low-tax usual suspects in the Sun Belt (Houston, Dallas, Atlanta, Nashville) and places you’d probably steer clear of if you were moving to find low taxes (four metropolitan areas in California, New York, Minneapolis-St. Paul, Washington). This makes sense: As we wrote in our last post, migration experts generally say that taxes rank low on the list of reasons that people move, far below things like job opportunities, being close to friends and family, or overall cost of living, which is often more affected by housing costs than state and local taxes.