The national Institute for Policy Studies (IPS) is out with a new study that will likely make the rounds for those advocating for states — like North Carolina — to raise taxes on “the rich.”
The key takeaway from the IPS study is that the “number of wealthy individuals and their cumulative wealth grew after the enactment of higher taxes on high earners” in states like Massachusetts and Washington.
The evidence they produce to support their claim is that the number of millionaires in those states rose after the tax hikes, and that millionaires in other states imposing high tax rates on the wealthy (such as New York and Connecticut) saw their wealth expand significantly as well.
An analysis provided by the Tax Foundation, however, uncovers some much-needed context to show that reality is the opposite of the message IPS is trying to convey.
For instance, the IPS study states that Massachusetts enjoyed a 36 percent increase in the number of filers with adjusted gross income of more than $1 million from 2018 thru 2022. That may sound impressive, until you compare that to the national average of “49 percent, let alone against the 61 percent, 75 percent, and 77 percent increases in Texas, Arizona, and Florida, respectively—three notably low-tax states,” as the Tax Foundation points out.
Meanwhile, high-tax New York saw a 22 percent increase, a growth rate touted by the IPS report, but a number that is downright anemic compared to the national average and low-tax states.
Notably, North Carolina’s growth rate in this category was 69 percent, well above the national average, at a time of steady tax cuts.
Similarly, the IPS study trumpets a 108 percent increase in the number of Massachusetts households with a net worth of $1 million or more from 2010 to 2022. But that figure falls short of the national average of 115 percent during that period.
As the Tax Foundation concludes, “people’s net worths soared in recent years, driven in large part by skyrocketing home values, pushing many people above $1 million in assets. That’s true everywhere. That it is also true in Massachusetts, New York, or Rhode Island is evidence of precisely nothing.” The evidence, if anything, points to these high-tax states lagging significantly in the creation of wealth and higher incomes.
There are other flaws in the IPS report pointed out in the Tax Foundation’s analysis as well, providing more evidence that the report not only fails to prove its point, but reality shows the opposite.
State taxes may not be everything, but they certainly do matter.
North Carolinians have enjoyed the economic benefits of a dozen years of tax cutting, and legislators should stand firm in continuing to generate the benefits that result from allowing hard-working citizens to keep more of what they earn.
