May 15, 2014
believe that state taxes aren’t important -- individuals and businesses make
location-selection decisions by weighing manifold factors, the talking point
goes, and revenue grabbed by Olympia, Little Rock, Harrisburg, et al is hardly determinative.
An element within
the pro-capitalism camp maintains that state taxes are monumentally influential
-- when solons and bureaucrats extract too much from workers, families, and
enterprises, the argument holds, economic disaster ensues.
latest skirmish is “State
Taxes Have a Negligible Impact on Americans’ Interstate Moves,” a report by
the far-left Center
on Budget and Policy Priorities. According to author Michael Mazerov,
“differences in tax levels” have “little to no effect on whether and where
people move, contrary to claims by some conservative economists and elected
The paper’s specific
targets are economists Arthur
Moore, and Travis H.
Brown, who “claim that people are leaving high-income-tax states for low-
or no-income-tax states in large part because they want to be able to retain
more of their wages rather than pay them to … governments.”
Both. And neither.
assembled an impressive compendium of stats. To begin with, he explains, most
of us are homebodies. Interstate migration is not common. In the 1980s, fewer
than 3 percent of Americans moved across borders each year, and the figure “averaged
just 1.6 percent annually in the past 10 years.” Furthermore:
• Some high-tax
states have stable populations. Between 1993 and 2011, moves in and out of Vermont were about even.
posted similar results.
• During the
same 18-year period, low-growth Wyoming, which
lacks an income tax, “lost households via migration to its neighboring states
of Colorado, Idaho,
Montana, and Utah -- all of which levy income taxes.” Alaska and South
Dakota do not tax incomes, but experienced overall outmigration.
• The data on
affluent households show no propensity for flight from income taxes. For
example, the “share of New York-to-Arizona migrants with incomes above $100,000
is the same as the share of New York-to-Florida migrants even though Arizona
levies an income tax and Florida does not. A higher share of New
Jersey-to-North-Carolina migrants had high incomes than did New
Jersey-to-Florida migrants even though North Carolina has an income tax.”
• The elderly
relocate to states “regardless of whether they have an income tax.
Retirement-age migrants make up approximately the same share of Californians
moving to income-tax levying Oregon and Arizona as they make up of retirement-age migrants to
no-income-tax levying Nevada and Washington.”
skillfully skewers some of the wilder assertions made by supply-side crusaders.
But his paper’s value is limited, because it’s largely an assault on straw men.
Yes, some right-leaning economists, public-policy analysts, activists, and pols
get nutty over taxes, particularly when levies on wages, salaries, and
investment income are imposed or raised. But thoughtful libertarians and
conservatives understand that it’s intervention in toto -- not tax rates alone -- that matters. And when states in
love with Unlimited Government face off against their fugal, pro-freedom
competitors, liberal policy wonks’ narrative gets dodgy.
passed over Harry Truman’s veto, states can ban the compulsory payment of tribute
to “organized labor.” Unions use the bulk of their dues revenue for lobbying
and electioneering, so states without right-to-work measures are reflexively
inhospitable to free enterprise. The results are health, environmental, and
safety regulations that are often far in excess of what’s needed for rational,
then, that the National Institute for
Labor Relations Research documents economic
dynamism in right-to-work states, which outperform their pro-union brethren
in private-sector payrolls, compensation growth, housing starts, and several
other key metrics.
states can also be counted on to embrace nannying of every variety, from
mandates for “green” electricity to Byzantine land-use restrictions, minimum
wages to anti-mobility “transportation” policies. In addition, there’s a strong
correlation between enormous unfunded liabilities and high taxes. Deep-blue
states such as California, New
Jersey, Illinois, and Connecticut face staggering expenditures
for pensions and post-employment healthcare. They lavished salaries and benefits
on greedy government unions, and taxpayers have only just begun to pay the
is clear: Taxation is not destiny. But the burden of state government is far
greater than the amount of revenue raised by levies on incomes, corporate
profits, sales, fuel, alcohol, and cigarettes. Investments unmade, homes not
built, compliance costs that require hiring expensive experts, time lost to
traffic congestion, unnecessarily high prices for essential goods and services
-- all count as losses in a ledger the left ignores.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
# # # # #