Do taxes matter when deciding where to live?

Feb 6, 2018

Tax burden and competition are often referenced to explain why some businesses and individuals decide to locate to or move from a state. Those arguing for more competitive tax rates say taxes play an important factor while others say "weather" is more important. Those state officials trying to keep Amazon's HQ2 in the Puget Sound think the lack of a state income tax (including on capital gains) is important enough to say repeatedly:

"Our advantages include . . . No personal income tax, no tax on interest, dividends or capital gains, and low corporate taxes."

The State Department of Commerce agrees proudly boasting:

"We offer businesses some competitive advantages found in few other states. This includes no personal or corporate income tax."

While these are pitches made to businesses, does a state's tax burden matter to individuals? Consider this email I just received expressing concerns about efforts to once again impose a capital gains income tax in the state (email shared with permission):

"As a Connecticut resident contemplating a move West, I’m doing research. Most of my life I’ve supported the coffers of high tax states, CA, NY, and now CT . . .

So, this bandying about on capital gains tax worries me.  What are the odds legislators will get this passed? I’d really not want to move across the country to find I’m taxed, literally to death (I’m soon to be 65) and seek a state to retire in. 

Even now, I attempt to live off investments so capital gains tax for me would be a huge consideration and potentially a deal breaker . . . 

I truly do not wish to move across the country (to the State of Washington) only and pay capital gains tax in my retirement years. 

That puts Washington on par with other high tax states. Certainly unfair to those who already live there and hard for someone like myself to make a decision with this threat lurking about . . . 

With best regards,

Araelle Ash
Avon, CT"

62% of Washington voters said in January they don't want a capital gains income tax. Voters in Washington have also rejected an income tax the last 10 times it has been on the ballot. For the sake of current Washingtonians and potential new residents like Araelle, it is time for lawmakers to listen to the clear and consistent message from voters - we don't want an income tax, period. 

Additional Information
Lawmakers again propose capital gains income tax
Tax Foundation: The Capital Gains Tax is Back in Washington—and it’s Still an Income Tax  
New poll shows strong opposition to income tax in any form