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Millions Not Moving

May 13, 2011 at 10:05 AM

A recent Reuters article headlined, “Americans try to outrun state, local tax hikes,” suggested that people are fleeing their place of residence to avoid higher state and local taxes.  It’s as if places like Stamford, Ct. and Far Hills, NJ are about to become ghost towns.

Noting that some states in recent years have raised income taxes on the most affluent households, the piece cited a New York accountant who has lately been “fielding a lot of calls from clients in neighboring states — Connecticut and New Jersey.”

Leaving aside just how many calls is “a lot” (the article doesn’t say), and the fact that last year New Jersey actually lowered its tax on incomes over $1 million,  this is yet another example of perpetuating the myth that higher taxes cause a mass exodus from states.

Yes, some people move, mostly for jobs or personal reasons.  A few are retirees who have more latitude in deciding where to reside, but whether they are lured to a state because of its taxes, the weather, or cheaper housing is very hard to know. But the vast majority of people do not move.  They contribute significant revenue to their states for education, healthcare, transportation, and other necessities for building a strong economy with good jobs.

The two most recent studies looked at New Jersey and the New England states.  As Robert Frank blogged in The Wall Street Journal about the New Jersey report, “a new study focusing on New Jersey provides some of the most detailed evidence yet that so-called millionaire taxes have little effect on the movements of millionaires as a whole.”  The New England report concluded, “Evidence from surveys of migrating households, the existing economic literature, and the new analysis in this paper all suggest that taxes do not play any notable role in causing people to leave a state.”

Yet articles like the Reuters piece appear with disappointing regularity to suggest something is going on that isn’t. States are suffering from an unprecedented drop in revenue because of the recession and its aftermath.  Upper-income tax increases help to solve that problem, not make it worse.

It is easy to find anecdotes about people fleeing their states to avoid high taxes.  It would be even easier to find people who aren’t moving because there are so many more of them. But somehow that doesn’t seem to be newsworthy.


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