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Monday, October 20, 2014

''State 'Income Migration' Claims Are Deeply Flawed''

Differences in income taxe ratess across states have little impact on migration:

State “Income Migration” Claims Are Deeply Flawed, by Michael Mazerov, CBPP: Some proponents of state income tax cuts are making highly inaccurate claims about the impact of interstate migration patterns on states with relatively high income taxes based on a misleading reading of Internal Revenue Service data.
Those making these arguments claim that many of the people who leave states with relatively robust income taxes do so largely in order to pay little or no income tax in another state, and that they take their incomes with them when they move, harming the economies of the states they left.  As a consequence, these “income migration” proponents claim, states with relatively high income taxes are suffering severe damage from the loss of income as “money walks” out of their states to lower-tax states.[1]
The first part of this argument — that interstate differences in tax levels are a major explanation for interstate migration patterns — is not supported by the evidence, as we documented in an earlier paper.[2]  People rarely move to lower their state income taxes.  Other factors, such as job opportunities, family considerations, climate, and housing costs, are much more decisive. 
The second part of the argument — that states with relatively high income taxes are suffering severe economic damage because they are losing the incomes of people who migrate to other states — is also deeply flawed. ...

    Posted by on Monday, October 20, 2014 at 10:17 AM in Economics, Taxes | Permalink  Comments (24)


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