Director of State Communications
Two governors are proposing this week to raise taxes on their state’s wealthiest residents. Today, Minnesota’s Mark Dayton proposed higher income tax rates on taxable incomes above $150,000 and a surtax on incomes over $500,000; tomorrow, Connecticut’s Daniel P. Malloy is expected to propose a higher rate on incomes over $1 million.
Some critics will surely claim, as they have in other states, that higher-income people will flee from the state. No such flight has occurred in other states that raised top rates, but that won’t stop these attacks, as some recent examples show:
As two Princeton University researchers, Cristobal Young and Charles Varner, conclude in a new report on a 2004 measure that set the 8.97 percent rate: “While in principle it is easier for tax avoiders to migrate out of state than out of country, the reluctance of people to do so gives states significant room to tax top incomes. Indeed, we estimate that New Jersey’s new tax raises nearly $1 billion per year, and tangibly reduces income inequality, with little cost in terms of tax flight.”
States are addressing huge, recession-induced revenue shortfalls by cutting everything from kindergarten funding to services for Alzheimer’s patients — and more deep cuts are on the way. Policymakers should ask those who can best afford it to pay somewhat more, solid in the knowledge — and despite assertions to the contrary — that they won’t flee from higher income taxes. In short, policymakers should base taxes on the cost of meeting real needs, not on unfounded fears.