One of the simplest arguments to make in the debate over tax policy can be summed up with two words: money walks. The idea that high taxes repel residents and low taxes attract them is often cited by proponents of cutting taxes.
But, according to a new study, that’s not true. A review of outside data, surveys and studies by the Center on Budget and Policy Priorities finds little evidence that people move because of taxes.
“There is no evidence that any more than a tiny minority of people making an interstate move are deliberately ‘voting with their feet’ in favor of a state that levies lower taxes,” author Michael Mazerov writes. “Internal Revenue Service data reveal that tens of thousands of people move each year from lower-tax states into higher-tax states, or choose to move to one state when another with even lower taxes is right next door.”
Here are five takeaways from the lengthy (but well-documented) report:
1. Few people move every year…
First, it’s worth noting that interstate migration is low and is declining, as you can see in the chart below. The latest Census data show 2.3 percent of the population moved in 2012.
2. … and even that is overstated.
Most of the people moving out of states are being replaced by people moving into them. Looking at IRS data for 25 states and the District of Columbia, CBPP found that most of the outgoing households were replaced by incoming ones. In all but three of those states from 1993 t0 2011 — the years for which IRS data were available — more than 80 percent of households that left were replaced.
3. Surveys show people cite other reasons for moving
Since 1998, the federal government has been asking people every year why they’ve moved. More than half the time, they said it was because of work or family. As CBPP reports, 32 percent cited “new job or job transfer,” while 23 percent cited “other family” as reasons for their move. Taxes wasn’t an explicit option in the survey, but there was an “other” category respondents could have chosen if that was the reason. And only 13 percent chose the “other” category, anyway.
Other surveys that do explicitly include taxes as an option have shown they play a tiny role in moving decisions. In Illinois nearly half the resident population wants out, according to a recent Gallup poll. Just 8 percent of those who said they wanted to move cited taxes as the reason. A larger share cited cost of living, quality of life, weather or location and work or business reasons. A similar pattern holds for Connecticut, where half the population also says they want out.
And, nationally, the difference is even starker: Just 3 percent of people interested in leaving their state said taxes were driving the decision, the smallest share among the seven options in the survey. Work and business was cited by 31 percent of respondents as the reason why they want to move.
4. There isn’t much proof that the no-income-tax states are magnets
Texas and Florida attract a fair amount of migrants, and both lack a state income tax. But if we look at the specifics, the argument that the two are related begins to seem weak. One of the biggest sources for Texas’s incoming migrants is… Florida, which sends more residents to the Lone Star state than 46 others. And five states with income taxes drew more people from Texas than they sent. The same is true of 11 states with Florida.
Nevada and Tennessee both had fewer incoming migrants than their taxing neighbors Arizona and North Carolina. On net, Wyoming gained a whole 1,000 households from 1993 to 2011. New Hampshire gained 17,000 households. Alaska and South Dakota had more people leaving than coming in.
5. Studies refute the claim
Of the seven studies on state taxes and migration published in peer-reviewed economic journals since 2000, six conclude that taxes played little role in moving, according to CBPP. The same is true even for the elderly and the top 0.1 percent of income earners, two of the studies found. The seventh study found that moves were motivated by low tax burdens, but also by per student education spending, which accounts for about one-fifth of all state and local spending.