Thursday, February 11, 2010

Moving To Higher Tax States

Freedom Foundation of Minnesota released a report yesterday about relatively high taxes pushing people out of the state. I read it to discover if anything new is unearthed. Nope, don't bother wasting your time. The Star Tribune provides a handy summary:

"This is not a PR problem, it's a taxing and spending problem," Annette Meeks, a Republican appointee to the Metropolitan Council, said at a Capitol news conference. "People are heading for low-tax and no-tax states. Let's stop chasing them out."

Liberals, however, countered that the shift -- from a net gain through interstate migration to a net loss -- coincides exactly with the "no new taxes" reign of Republican Gov. Tim Pawlenty. It started the year he was elected, 2002, and has continued ever since.

Demographers noted that, far from being a sudden new shift, departure is the norm for Minnesota going back for decades -- only briefly interrupted in a major way by the blazing-hot economy of the '90s.

"My sense is that if people are leaving the state, it's not because of the taxes," said Will Craig, associate director of the University of Minnesota's Center for Urban and Regional Affairs. "It's because of the weather, and jobs. I know a guy who was in construction here, and now he's in Arizona," after the dramatic fall in homebuilding that started at mid-decade.

I don't understand why there is any controversy. Pick a time period and calculate the out-migration rates (NOT net out-migration rates) for every state. Settle on some tax metrics (income?) and see if lower tax rates positively correlate with lower out-migration rates. Then we might have some idea about taxes as a push factor.

From there, we could devise clever research questions that control for a variety of variables as we hone our analysis. Is there a tax effect discernible between domestic migration winners? The goal in this line of inquiry is to eliminate the climate advantage.

Or, look at who is moving to Minnesota. How much does tax regime explain that flow? However, I doubt the Freedom Foundation of Minnesota is interested in getting to the bottom of the shrinking tax base problem. They would likely lose their benefactor if they tried.

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