Lawmakers in Arizona, Arkansas, Idaho, Iowa, Louisiana, Missouri, Montana, North Carolina, Ohio and Oklahoma have also approved cuts to their top personal income tax going into effect either this year or in future years.

“There are states moving in different directions,” said Carl Davis, research director at the left-leaning Institute on Taxation and Economic Policy. In Blue states, tax hikes are being floated by Democratic lawmakers as a partial solution to “a period of drastically widening inequality,” he said, while in Red states, “a lot of times these are sold as being part of an economic development strategy.”

The Tax Foundation estimates that states without an income tax grew their economies 56% faster than states that have an income tax over the last decade, while growing their populations at twice the national rate.

Low taxes aren’t necessarily the reason for that growth, however. “For every state that’s performed well economically with low taxes, there’s a state that’s performed well economically with high taxes,” ITEP’s Davis said.

In fact, when it comes to the innovation and technology creating vast new fortunes, states with high taxes and more generous public services have a clear edge over states with leaner governments that put less burden on the wealthy.

California receives about half of U.S. venture capital funding, a flow of money to startups that has surged in the past few years. U.S. venture investments totaled nearly $239 billion in the first three quarters of 2021, according to PitchBook-National Venture Capital Association data, up from $166 billion in all of 2020 and just $88 billion in 2017.

The Golden State’s only significant rivals for those investing dollars are New York, with almost 15% of the total and Massachusetts with 10%. Texas, the second-largest state by population after California, got just 2.7% of venture dollars, while Florida, the third largest, netted a paltry 1.3%.

Higher-Tax States Dominate Startup Economy
“People are not very sensitive to their tax rates,” said Cristobal Young, a Cornell University sociology professor, who has studied the issue. Wealthy people often have close ties in the places where they got rich, making them “much less likely to migrate than other folks,” he said. “You can save a lot of money on your taxes, if you’re willing to give up your lifestyle and move to a place where people don’t know who you are.”

Though a few millionaires and billionaires are “very mobile,”—think of 20-something crypto investors—“there just aren’t that many of them,” Young said.

Still, there’s no denying that places like New York are getting more expensive for millionaires and billionaires who live there.