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Migration Myth Strikes Again

April 16, 2012 at 12:41 PM

Proponents of the migration myth are at it again, trying to sell the idea that if states with lower taxes gain more population than states with higher taxes, taxes must be the reason.

To prove that people migrate from state to state in search of lower taxes, the latest edition of the American Legislative Exchange Council's (ALEC) "Rich States, Poor States" report notes that, over the past two decades, Hawaii (which has an income tax with a relatively high top rate) has lost twice as many residents to other states as Alaska (which has no income tax).

Wait, you might ask. What about differences in the job market? Oil prices? Housing costs? Shouldn't we take these and other potential factors into account?

Indeed we should.

As we discussed in a major report last year, the vast majority of people live their whole lives in the state where they were born, and the main reasons people move from one state to another are job prospects, housing costs, family considerations, and climate. So, for instance, to draw any meaningful conclusions about our two newest states, you'd want to factor in that housing in Anchorage is a bargain compared to Honolulu. Studies by economists and demographers that take into account the wide range of other factors show consistently that taxes have little if any impact on migration.

The ALEC report ignores the growing body of research that debunks the tax-flight myth, instead citing statistical tidbits that might seem compelling at first glance but wilt under scrutiny.

For example, ALEC attributes Florida's 46 percent population gain between 1990 and 2010 to its lack of an income tax, ignoring the fact that neighboring Georgia -- which has an income tax -- grew by 50 percent over that period.

As for Alaska and Hawaii - the states that ALEC uses to illustrate the tax-flight myth -- IRS data show that, in fact, slightly more households are moving from no-income-tax Alaska to high-income-tax Hawaii than the other way around. In 2010, the last year for which data are available, 300 households moved from Alaska to Hawaii; 287 moved the other way.

As our report stated:

It would not be credible to argue that no one ever moves to a new state because of the desire to live someplace where taxes are lower. But neither is it credible to say that taxes are a primary motivation, nor that migration has a large impact on the revenue impact of tax measures.