As the Projo reported this morning, Paul Dion and Bethany Scanlon of Rhode Island’s Office of Revenue Analysis recently published a study [pdf] examining the actions of wealthy state taxpayers from 2007 to 2011 – always a subject of debate and discussion locally.
I emailed Dion and asked him to break down some of the paper’s most interesting points for Nesi’s Notes readers. Here’s his response, lightly edited for clarity – and augmented with charts! Here’s what he said:
A couple of interesting things come out of the study, some technical, some observational.
On the technical side, I was surprised, but probably shouldn’t have been, that there were so many possible paths that a taxpayer could follow after filing a TY [tax year] 2007 Rhode Island resident return with federal AGI [adjusted gross income] of $200,000 or more. A [total of] 121 possible outcomes was more than I thought would be the case. Granted many of those cells are empty but still 121 possible outcomes was more than I expected initially. [This chart shows what he means.]
On the observational side, a couple of things pop out.
First, 86.5% of the RI resident tax filers with federal AGI of $200,000 or more in TY 2007 continued to file RI resident tax returns in each of the tax years 2008 through 2011. That is pretty high, especially when you consider the fact that the state is 30 miles-by-40 miles and one can easily move to a bordering community in MA or CT and still have the same lifestyle one has in RI (i.e., access to entertainment, restaurants, employment, etc.).
Second, the volatility in the income ladder was more than I expected.
For example, 27.8% of the TY 2007 RI resident filers with federal AGI of $200,000 or more filed RI resident returns in TY 2008 with federal AGI below $200,000. Similarly for TY 2009 vis-a-vis TY 2008 it was 36%, TY 2010 vis-a-vis TY 2009 it was 34.8% and finally for TY 2011 vis-a-vis TY 2010 it was 35.1%. Basically, more than a third of wealthy RI residents appear to turn over every year. I guess it might be true that one-fifth of the population is wealthy at one point in their life.
Third, I was mildly surprised that the number of “Movers” (taxpayers who file a non-resident return the year immediately after filing a resident return) was on par with “Goners” (those who stop filing any RI tax return immediately after filing a RI resident tax return). From the rhetoric you hear about the wealthy fleeing RI, I found it interesting that nearly an equal number retain financial ties with RI as those who completely sever ties with RI.
Fourth, within the Movers category, MA as a destination and FL as a destination were pretty close percentage-wise, as were the below-$200,000 and the $200,000-to-$500,000 of federal AGI groups. Clearly, Movers were a bit older when you look at the age categories. As for Goners, the largest percentage was in the $200,000-to-$500,000 AGI category and was skewed younger than the Movers. This indicates to me that this group is likely comprised of executive-level professionals who relocate because of a new job.
Fifth, within the category of “Faders” (those taxpayers who filed a RI non-resident return immediately after filing a RI resident return and immediately before no longer filing any RI tax return), the interim relocation destination was spread all over the place, although FL and MA still had substantive percentages as individual states. The Faders cohort was skewed to the below-$200,000 and $200,000-to-$500,000 federal AGI amounts but the age demographic showed a substantially higher percentage for 65-and-above than the Goners classification.
Sixth, when looking at the intersection between AGI and relocation destination, the positive correlation between FL and AGI of $500,000-and-above for Movers was striking. The percentage of total Movers with AGI above $500,000 that relocated to FL was twice that of Movers with AGI above $500,000 that relocated to MA. That is significant.
In the other two AGI categories, the correlation between AGI and relocation destination was more uniformly distributed. For Faders, FL does not even register as an interim relocation destination for AGI of above $500,000 (nor did MA). For AGI below $200,000, however, FL had the highest percentage of Faders.
Finally, when looking at the intersection between age and relocation destination, the positive correlation between FL and 65-and-above for Movers was striking. The percentage of total Movers aged 65 and above that relocated to FL was nearly four times that of Movers aged 65 and above that relocated to MA. That is significant.
In the under-45 and 45-to-54 age categories, the percentage of Movers that relocated to MA was highest. In the 55-to-64 age category, FL overtakes MA for Movers but other regions of the country also become more prominent. For Faders, a positive correlation between age category and FL as an interim relocation destination is exhibited but several other areas of the country gain prominence. For Faders, although MA does pick up a recognizable percentage of Faders based on age, MA typically falls behind other areas of the country.