Of the ten fastest growing state economies in the country, five are states with no income tax. This is despite the fact that there are only nine states in the nation that don’t impose an income tax on their residents (remember that number was 10 until 1991 when the Connecticut income tax was enacted). Of the remaining states on that top ten fastest growing economies list, two states have no sales tax. Additionally, when looking at cities, nine of the fastest growing cities in the country are in states with no income tax.
The number one fastest growing economy in the country right now is Washington State. I know it well, as I lived in Seattle for 20 years before coming back to Connecticut four years ago. How are the two states different? Washington has no income tax, no car tax, and property taxes are one-half to one-third of what they are here in Connecticut. It’s plain and simple: They’re booming! We’re dying!
Though the cost of living in Washington, especially in Seattle, has risen significantly and the traffic is worse than ever, it continues to boom. Why? The competition for companies to attract the best and most valuable talent in the High Tech, Finance, Aerospace, Health Care, and Pharmaceutical industries is intense. Salaries and incomes of $200k to $500k annually for managers and directors are becoming commonplace. In California, a manager earning $200k per year at one of these firms pays the State of California 9% income tax, or $18,000 per year. If he relocates to Washington he pays $0. A director at one of these firms making $500k per year hits California’s 13% state income tax, paying $65,000. In Washington she pays $0. The tax savings for senior executives can skyrocket from there.
So where are the CEOs, Senior VPs, entrepreneurs, and other top decision makers and job creators inclined to relocate? A state with high income tax, or a state with no income tax? The answer is, of course, quite obvious and can be seen playing out throughout the country.
The goal of our Connecticut State Government will be to make the tax burden as low as possible. Then, once we get the tax burden down as low as we possibly can, the next goal will be to lower it even further.