If You Tax Them, Will They Flee?
Do high taxes drive people to move to lower-tax states? Two new studies highlighted today on National Public Radio examine different angles on this perennial issue, both coming to similar conclusions.
Researchers at the Political Economy Research Institute at the University of Massachusetts, in their new report, The Impact of Taxes on Migration in New England, addressed the question of whether high taxes drive residents to move.
If you can make it past the equations like this…
…and skip to the end, you can find their conclusion (emphasis mine):
“Evidence from surveys of migrating households, the existing economic literature, and the new analysis in this paper all suggest that taxes do not play any notable role in causing people to leave a state. The most important factors in influencing household migration are economic and family-related reasons. If anything, higher state income taxes are shown to decrease the numbers of people leaving a state. Taxes do appear to influence the choice of which state to live in once a person has decided to move, but the impact is modest. If states use the revenues from higher taxes to create jobs, reduce unemployment, and reduce property crime, the small negative impacts from taxes can be easily overcome.”
Okay, but what about wealthy people, who have more money at stake and also a greater capacity to bear the costs of moving? Are they more likely to pull up stakes and move to lower-tax states? Well, no.
An article in the National Tax Journal examined the effects of New Jersey’s 1994 implementation of a tax on high-income earners. The article compared the behavior of people who were just under the line for the new tax with those who suddenly had to pay more taxes. The result? “The effect on migration is minimal,” NPR quotes the study author as saying.
The bottom line: People move to other states for many reasons, but very few people – at any income level – move out of state seeking a lower level of taxation.