More evidence for tax flight

Last week I affirmed the existence of tax flight, the negative impact that tax burdens have on migration flows. A few collectivist policy institutes, both in North Carolina and at the national level, want to deny this relationship, but the evidence just keeps coming in.

The Empire Center, for example, has just released a report on the “Half Century Exodus” from New York State. They document that since 1960, New York has lost 7.3 million residents to the rest of the country. Even after heavy foreign immigration, the state still experienced a net decline of 2.5 million residents. From 2000 to 2010 the net decline was 1.6 million residents, the highest of any state as a percentage of population (between 8 and 9 percent net outflow).

New York officials have only themselves to blame, though. People are fleeing their overbearing and burdensome policies. The Mercatus Center ranking of economic and personal freedom finds New York to be the worst in the nation, ranked no. 50 overall and in terms of economic freedom. The Tax Foundation has come to the same conclusion and ranked New York no. 50 in its 2011 Business Tax Climate Index. (Click below to watch an overview of the Mercatus ranking of freedom across the 50 states.)

The Mercatus Center has also just released a new analysis of the migration trend after New Jersey raised its income tax rate from 8.97 percent to 10.25 percent, for those in the highest income tax threshold. As I also noted in my Friday column, New Jersey was the primary counterexample that the Center for Budget and Policy Priorities offered, but they spoke too soon. The deeper examination from Antony Davies of Duquesne University–controlling for property-tax rates, sales-tax rates, high-income tax brackets, unemployment, and state/county-specific and time-specific effects–found that:

“Higher state income-tax rates cause a net out-migration not only of higher-income residents, but of residents in general. [They] also [found] that changes in the income levels to which the tax rates apply similarly affect out-migration…

All of these data suggest a recipe for population depletion. States lose households to more tax-friendly states by (1) lowering the ‘high-income’ threshold so as to capture more households, (2) increasing high-income tax rates, and (3) increasing property-tax rates.”

Fergus Hodgson

Director of fiscal policy studies at the John Locke Foundation, policy advisor with The Future of Freedom Foundation, and host of The Sta...

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