The fear sometimes expressed that a state income tax on high income households will drive wealthy people from the state is not supported by the evidence. People choose where to live based on multiple factors, including jobs, proximity to family, and lifestyle preferences. Since 43 out of 50 states have a state income tax, most Americans accept it as the norm. In fact:
- 3 of the states with the highest top marginal income tax rates (New Jersey, California, and Hawaii) have higher percentages of households with incomes above $200,000 and higher average incomes for the top 5% of household than any of the 7 states with no income tax.
- Those 3 high-income-tax states also have both a higher percentage of well-to-do households and higher top incomes than the U.S. average.
- 5 of the 7 states with no income tax have fewer households with incomes over $200,000 than the U.S. average.
- The average income of the top 5% of households is lower than the U.S. average in all the states with no income tax.
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