One of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because...
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- The Facts on Interstate Migration: Part One
The Facts on Interstate Migration: Part One
The Center on Budget and Policy Priorities’ Michael Mazerov has a voluminous new report discussing how state tax policies relate to migration. It’s an interesting debate to be had, both because migration is a major economic issue for many states, and because the two extremes of the debate tend to be so vocal. Advocates on one side appear to argue that small changes in taxes create huge changes in migration while advocates on the other seem to suggest that people don’t respond to taxes at all. CBPP’s new report says that “State taxes have a negligible impact on Americans’ interstate moves,” and so falls pretty comfortably in the “taxes don’t affect migration” camp.
The report’s key claims can be summarized as:
- Interstate migration is small and declining, so, implicitly, it is not extremely economically important.
- People mostly move for jobs, family, cost of living, and climate, but not for taxes.
- Low- and middle-income households are more likely to move than high-income households, contrary to what “conservatives” claim.
- High-tax states actually don’t have that much more net out-migration than low-tax states
Over the next week, I’ll address these claims one-by-one in a series of blog posts. First, I’ll talk about how big interstate migration actually is, and what that might mean. Then I’ll write about reasons why people move. After that, I’ll look at the income profiles of inter-state migrants. Finally, on Friday, I’ll venture an assessment of whether or not low-tax states actually do enjoy better migration patterns.
But, first, a major caveat: there is a grain of truth to CBPP’s position. People move for many reasons, and taxes are only one of many influential factors. Recent Gallup polls find that taxes in some states generally matter less than some factors like weather, family, jobs, quality of life, or education. However, in some states, taxes are a major factor: like New York, Illinois, Maryland, and Connecticut.
What we’ve consistently argued at the Tax Foundation is that taxes matter on the margin, but that they’re just one of many factors. After reviewing Mazerov’s main arguments, this theme will be apparent: that his analysis doesn’t address the effect of taxes on the margin. In the debate about migration, both Mazerov and the research he criticizes serve as political foils for one another, without addressing how migration actually works. I will endeavor to offer a description of how taxes impact interstate migration and what that tells us about tax policy. As it turns out, migration matters, and taxes are a factor affecting migration.
UPDATE: Links to the rest of the series:
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