Friday, January 08, 2010

Taxes And Brain Drain

I'll keep this post short and sweet, real simple. The claim:

At the heart of Ohio's fiscal problems is a tax system and business climate that has been driving people out of the state for more than 15 years, resulting in a shrinking economy and a smaller tax base.

Undermining the claim within the same article:

From a regional competitiveness standpoint, Ohio is surrounded by states that, generally speaking, have much lower tax burdens. Michigan, Indiana, Kentucky, and West Virginia are all clustered in the middle of the national rankings (27th, 28th, 25th and 29th respectively), while Pennsylvania's tax burden is 11th highest in the nation, but still lower than Ohio's.

What's the link between tax burden and out-migration again?

4 comments:

Steve said...

I think the tax system can be relevant to out-migration, but yes total tax burden isn't everything. What kind of taxes are we talking about? Who ends up paying them (or would if we're talking about businesses and people migrating)? What are you getting for your taxes? All of these are relevant questions.

Maybe the real question is how screwed up the state and local governments are. I have talked to plenty of people who left Michigan for example and sooner or later the problems generated by the state government and the local government of Detroit invariably come up. They weren't comparing tax burdens, but the pointing out the low quality of government in these places. That was a part of the reason why they left, and they have convinced me to want to never move to Michigan.

Jim Russell said...

Tax geography obviously helps to drive intra-regional migration, but even that takes a backseat to school district reputation.

Local governance strikes me as a strong predictor, but I've only seen anecdotal evidence of a migration effect. Perhaps someone is aware of some research on the subject? But I wouldn't red line an entire state with that in mind. Surely there are a few localities that are the exception to the rule.

Steve said...

Tax geography obviously helps to drive intra-regional migration, but even that takes a backseat to school district reputation.

Maybe it would be more accurate to call it "quality (and cost) of government services" migration for lack of a better term. Better schools are the most obvious example but even something as basic as adequate police protection can be an important factor (i.e. the reason why people don't start living in certain sections of Detroit despite how cheap the real estate is).

Local governance strikes me as a strong predictor, but I've only seen anecdotal evidence of a migration effect. Perhaps someone is aware of some research on the subject?

Unfortunately, I'm just a layman with an interest in these issues.

But I wouldn't red line an entire state with that in mind. Surely there are a few localities that are the exception to the rule.

From what I understand from everyone from Michigan that I have talked to about these things (and yes it is all anecdotal), it's not just a local government problem in some places in Michigan (i.e. Detroit), but a state government problem as well. This seems to be rather unique in the rust belt. While people from PA, OH, IN, NY, etc. might have issues with the governments of the states they're from it doesn't rise to anywhere near the same level as with Michigan. Even though there are plenty of good localities in Michigan (I would assume) it doesn't matter if the state government destroys the state.

I'm from Chicago where a lot of Michiganers have moved to and live in DC now with a lot of Pittsburghers have moved to. The difference between those two groups about where they came from is as different as night and day. The Michiganers say don't move to Michigan ever whereas the Pittsburghers describe Pittsburgh as a place you would want to live and they could move back to depending on their own personal desires and circumstances.

Jim Russell said...

Concerning why people move, this report is helpful. The best predictors for migration models are well understood. The lower taxes jihad almost always ignores this literature. That's too bad because I suspect there are some useful policy suggestions lurking beneath the numbers, but the libertarian vanguard doesn't seem interested in doing the work. I am confident that these advocacy groups are merely invoking the brain drain red herring for political gain.

It would be interesting to survey expatriate attitudes about home-state governance. I've long suspected that the Pittsburgh fervor is unique among these domestic diaspora communities, but I know many people from there who also HATE the place. I should say that I also know Detroit refugees who are very passionate about their hometown, despite the warts.

In general, people are very cynical about governance. I'm ambivalent. Every Rust Belt community (with a few notable exceptions such as Youngstown) seems to carp about how government is corrupt and that the system is broken. Yet there are few places you can hold up as an example as how to address the problems. I figure government is a convenient scapegoat and fosters apathy.