The Register Citizen (Torrington, CT)
Do taxes make state residents leave?
Claims by Stefanowski, Lamont tell only part of the story
Bob Stefanowski says high taxes are driving the state’s wealthiest residents away.
“Eighty people per day are leaving the state,” Stefanowski, the GOP nominee for governor, often repeats.
Democrat Ned Lamont says the opposite is true: the state’s population has grown since 1991.
The truth is, neither is entirely wrong. But both are only telling part of the story. The part that gets lost is in the details — who is moving into the state compared to who is leaving, and how much money the departing take with them.
“We lose people every day, but we gain people every day,” said Nancy Steffens, a spokesman for the Connecticut Department of Labor. “As far as the net effect, we haven’t lost population.”
Steffens pointed to the state’s 2017 Economic Digest report, which projects the state’s population will grow 1.7 percent through 2040.
That anemic growth rate, however, is less than 20 percent of the growth rate of the previous 25 years, writes Patrick Flaherty, an economist in the Department of Labor’s Office of Research
Since 2004, Connecticut’s population has grown 2.3 percent, compared to about 3.5 percent in neighboring states, other studies, including one from the Commission on Fiscal Stability and Economic Growth, show.
A report by the Connecticut Office of Policy and Management in May 2017, looked at the state’s population and migration trends and found the average annual loss of people prior
to the 2008 was about 17,000 — or about 47 people per day. From 20152017, however, that number increased to 30,000 people moving out of the state each year, or about 82 people per day.
That means that the state’s overall population has increased — Lamont’s point. But, around 80 people per day were, in fact, leaving the state for about three years — Stefanowski’s point.
More telling than the population, perhaps, are the dollars.
Revenue from the state’s 100 largest-income taxpayers fell about $200 million from 2016 to 2017, in part, because many of the highest earners left the state, data from the state’s Department of Revenue Services shows.
Those migrating into Connecticut are earning about $30,000 less per household annually than those who are departing.
Since 2007 there has been an increase in people moving out of the state across all income groups, most noticeably
those earning between $50,000 and $100,000 and those earning $5 million or more. There’s also been a decline in the number of earners over $5 million moving into the state.
That means the state’s wealthiest population — for whom the state is famous, and who contribute the most to the state’s budget via taxes — has declined the most, contributing to shortfalls in the state’s budget
Mike Barbis, a realtor for Halstead, notices the change. He specializes in properties selling in the $2 million to $3 million range in Fairfield County. He said he’s seen a significant change in the buyer market in Fairfield County. The young couples making their way out of New York City to start a family in Connecticut aren’t spending as much as they used to, a change Barbis attributes to a changing employment market in New York.
“Ten or 15 years ago, those buyers, they both worked on Wall Street, they both made a lot of money, and they would come up here and buy an expensive house,” Barbis said. “Now, they work in
tech or media ... they aren’t making that kind of Wall Street money. They’re buying an $800,000 house, they’re not buying a $1.8 million house.”
A poll conducted by Sacred Heart University’s Institute for Public Policy in 2017, showed that 49 percent of respondents making more than $150,000 a year are considering moving out of the state within the next 5 years.
A ‘wait and see’ market
While the state has more billionaires this year than it did last — up from seven to nine — high profile departures like that of billionaire hedge fund manager Paul Tudor Jones and real estate investor Barry Sternlicht have proved just how mobile the rich can be. Barbis said many others — though not nearly as wealthy as Jones and Sternlicht — are holding off on buying property until they know which direction the state is headed, and understand the impact of changes in the federal tax code.
“We were really hurt by the changes in the tax code under the Trump Administration, all those places (in Fairfield County), your property taxes are going to be more than $10,000 per year,” Barbis said.
Another change in federal tax law, a limit in the mortgage interest deduction to $750,000, could hurt sales in neighborhoods where an average sale is $1.5 million.
Barbis said his clients don’t want to leave Connecticut. They’re not waiting to see who is elected — Stefanowski or Lamont — but, he said, they are waiting to see what that person and the new state legislature do to change the climate in the state.
“I just sold a house in New Canaan for a wealthy couple, his wife has a business here, their friends are here, their clubs are here,” Barbis said. “They don’t want to go to Florida. But they have not bought a house. They are really weary and they’re renting. They’re waiting to see what happens.”