Recent Assertions about State Tax Increases Don’t Hold Much Water [Revised Aug 7, 2009]

A more careful examination of Internal Revenue Service (IRS) data for the period from 1997 to 2006 reveals a far different picture, however. They show that the number of “rich” taxpayers (federal income tax filers with adjusted gross incomes (AGI) in excess of $200,000) rose considerably in Connecticut, New Jersey, and New York over the course of that ten year period, including in the years immediately following state income tax changes in those states. Indeed, at both the start of that ten year period and at its conclusion, Connecticut, New Jersey, and New York were generally “richer” than the national average – that is, they had a greater concentration of federal income tax filers with adjusted gross incomes in excess of $200,000 than the country as a whole – suggesting that state tax policy changes did little to drive away wealthy residents.

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