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Tax Burdens Really Can Get People to Move

  • Blog Post by: Lee Schafer
  • May 2, 2014 - 12:11 PM

There’s been plenty of chatter the last year about how Minnesotans are planning to flee the state due to its heavier tax burden, particularly since income tax rates on the highest earners were raised last year.

Most of the talk is simply, “A friend said his neighbor’s uncle would be moving to Florida.” But it echoes in business, media and political circles.

Now comes a Gallup poll that could flip the conversation. It turns out Minnesota was very high on the list of states people didn’t want to leave even if they could.

The new poll, released this week, said that 25 percent of Minnesotans would leave the state if they could. Montana, Maine and Hawaii led the list with just 23 percent saying they would leave if they could.

A separate question, how likely it is someone would move, revealed that Minnesotans are largely planning to stay put. Only 9 percent said they were at least somewhat likely to move in the next 12 months. And the only three states ahead of Minnesota on this list were at 8 percent.

In contrast, fully half the residents of Illinois said they would leave if they could, and one in five reported that it was at least somewhat likely that they would. The residents of states like Connecticut and Maryland were only slightly less eager to leave.

Gallup also asked why someone wanted to move, and tax burden generally wasn’t the top reason given. It was the top factor for 8 percent of the people from Illinois, for instance.

Of course, this survey data says nothing about the demographic profile of those most inclined to leave, such as whether the small number of Minnesotans who told pollsters they may move turned out to be mostly high income earners nearing retirement age.

But another perspective on the impact of tax burdens in intrastate migration was offered this week by Bill Bergman of Truth in Accounting, a Chicago-based nonprofit trying to improve transparency and accuracy of government finances.

One of the exercises his group does is prepare of ranking of states for taxpayer burden, and by that he does not mean the taxes paid in a year. His “taxpayer burden” ranking adds up the net effect of all of the state government liabilities, including underfunded public employee pension programs.

The worst on his list, with per capita “taxpayer burden” of $49,000, was Connecticut. And it was second on Gallup’s list of states people want to leave. Illinois was fourth, at $31,600.

Minnesota actually fared well on this ranking, at about 38th in terms of “taxpayer burden.”

Bergman also consulted the most recent data from United Van Lines, which publishes an annual report on migration patterns between the states.

Of the 15 states with the highest tax burden, meaning state and local taxes paid as a percentage of income, and taxpayer burden as Bergman defined it, they were all near the top of United’s list of states with the most outmigration.

Of the top five on the United list of people moving out last year -- New Jersey, Illinois, New York, West Virginia and Connecticut -- only New York isn’t in the top 10 of Bergman’s list of worst states for taxpayer burden.

Now, reaching too sweeping of a conclusion here is clearly unwise. Gallup pointed out that family and friend considerations and new jobs are by far the two most frequent reasons given for moving.

Yet it’s hard to dismiss Bergman’s conclusion that high state and local tax burdens really do cause people to pack up and leave.

© 2014 Star Tribune