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Conn. Lost $2.6 Billion in 2016 Revenue Due to High Earners Leaving State

The Connecticut State Capitol in Hartford, Conn., August 17, 2017. (Hilary Russ/Reuters )

The state of Connecticut forfeited $2.6 billion in government revenue in 2016 as residents, particularly high-earners, fled the state for a lower cost of living, according to a recent study by the Cato Institute.

The study, released ahead of a tight gubernatorial election that has focused heavily on the state’s high tax burden, found that Connecticut lost 12,254 tax filers over the course of 2016, the sixth highest lost in the country over that period.

“Strictly speaking, AGI (adjusted gross income) does not migrate; people do,” wrote study author and Cato director of tax-policy studies Chris Edwards. “Nonetheless, saying income is ‘migrating’ is rough shorthand for saying that the earning power of households is moving between states.”

The net effect of out-migration was exacerbated by the income gap between those leaving and those arriving in the state, according to the study: New residents earned only 55 percent of their departing counterparts’ salaries on average. The migration rate 1.4 percent for residents earning between $50,000 and $200,000 and 2.1 percent percent for those earning over $200,000. The latter group left at the highest rate, and the loss of just five ultra-wealthy individuals to Florida cost the state government more than $68 billion in tax revenue.

Overall, the study found that states with relatively high income-tax rates tended to lose residents while their low-tax counterparts gained residents and the resulting revenue. In fact, 24 out of 25 states with a tax burden exceeding 8.5 percent suffered a net loss of residents.

The top individual income-tax rate in Connecticut is 6.99 percent and has been raised by state lawmakers on three separate occasions since 2008. The state currently ranks 46th in economic growth, 46th in road quality, 47th in state-pension funding, 47th in population growth, and 50th in personal-income growth since 2007.

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