It seems like every spring, after the end of tax season, CPAs talk about the number of their clients who have left Connecticut to establish residency elsewhere. This is not a recent phenomenon. It’s a growing trend over the years.
On several occasions, the Connecticut Society of CPAs (CTCPA) has surveyed its approximately 6,000 members on this topic at the request of the state Department of Revenue Services (DRS) and shared the results with the DRS. During the last couple of years, we’ve also surveyed our own membership on this very issue as it pertains to their own future plans. Although the results of our membership surveys are not yet broad enough to be deemed statistically valid, they do show a trend developing.
From 2012 to 2013, the number of CPAs responding “yes” to the following question doubled: “Have you considered relocating to a state other than Connecticut?” Meanwhile, the number of respondents who said they have made an out-of-state real estate investment increased by 250 percent from 2012 to 2013.
That’s significant.
What does all of this anecdotal information mean?
It is an indication that Connecticut taxpayers with financial wherewithal are choosing to relocate rather than suffer the economic consequences of remaining in Connecticut. Without a compelling reason to stay, like family ties, retirees and others with means are voting with their feet and ultimately their wallets.
Some may argue that there are also people choosing to relocate to Connecticut, particularly New York residents. It is true that Connecticut (and New Jersey) continue to attract individuals from New York who want to remain close to New York City, but want to escape the even higher tax burdens levied by the Empire State and its localities. I would counter by asking a key question: If a person has relocated once to find a lower tax location, why would they necessarily be satisfied as they continue to evaluate their tax environment?
Connecticut is only relatively attractive tax-wise to New York.
On an absolute basis, Connecticut remains one of the highest-taxing states. And it’s not just this tax or that tax; it’s the aggregate — income tax, property tax, sales tax, succession tax, gasoline tax, etc. We pay the price, dearly, for every aspect of our Connecticut lifestyle, cradle to grave.
Our elected representatives regularly compare Connecticut taxes with those of neighboring states and conclude that our taxes aren’t out of line. The problem is, lawmakers are looking at a region that is out of step with almost the entire country. Of the 10 states with the highest state and local tax burdens per capita, seven (including Connecticut) are within a three-hour ride by car from Hartford.
A number of studies by others, including the Tax Foundation, a Washington D.C.-based think tank, support the anecdotal information coming from Connecticut CPAs. People with wealth are moving from higher-taxing states, to states with lower tax burdens.
One year ago, USA Today reported Connecticut was the third-highest-taxing state in the nation. More recently, CNBC rated Connecticut the second worst “tax friendly state for retirees” in a report that concluded “seniors looking to stretch their hard-earned savings further might do well to cast a wider net (beyond Connecticut).”
As the so-called “silver wave” of retiring Connecticut Baby Boomers reviews their bank accounts, they will likely be reviewing their geography as well.
Arthur J. Renner is the executive director of the Connecticut Society of Certified Public Accountants.
