Between now and “tax day” on April 18, we’re going to see a lot of misinformation about the impact of taxes on people’s lives — like the oft-repeated myth that state tax policies cause great numbers of people to flee one state for another. In reality, people move for lots of reasons, and taxes make almost no difference at all.
A recent CNBC.com article advanced the tax-them-and-they-will-flee canard, noting in part that the top three destinations of people who left California between 2000 and 2008 were Arizona, Nevada, and Texas — which it calls “low-tax states.” But it failed to mention that during the same period, the top destination for people who left Arizona, Nevada, and Texas was … California.
Were they trying to escape those states’ low taxes? Of course not. Mostly, people move because they got a better job, they want to be closer to family, or they need to find more affordable housing. (Housing cost differences from state to state usually dwarf differences in taxes.)
Study after study shows not only that taxes aren’t a significant driver of state-to-state migration, but that when states raise taxes — especially on high-income people, who tax foes claim are the first to move in search of lower marginal rates — they generate major revenue gains to help meet public needs.
Conversely, if states slash taxes in the mistaken belief that that will keep people from moving, public services like education, health care, and infrastructure will suffer. People and businesses alike care about those things, too, when deciding where to locate.
Because the recession and its aftermath brought an unprecedented collapse in revenues, states face a widening gap between needs and resources. We’ll keep pointing that out when anti-tax advocates use the migration myth to muddle the debate over how states should set and pay for their priorities. As they struggle to meet rising needs, states should act on the basis of real-life considerations, not cherry-picked data and false assertions of cause and effect.