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Friday, October 28, 2016

Report: Taxes Barely Affect Decisions To Move Between States

Report: Taxes Barely Affect Decisions To Move Between States

A report released by the Center on Budget Policy and Priorities on Thursday shows that differing tax rates among states have negligible effects on whether or where Americans choose to move. In other words: Rick Perry is wrong.

For years, conservative economists and politicians have touted lower tax rates as a major incentive that draws new residents and businesses to certain states. But according to the CBPP report, not only is this relatively insignificant to potential movers, but may also have detrimental effects on the state.

Cutting taxes may result in the deterioration of important state-funded public services, including education, public safety, parks, roads, and other critical infrastructure, which in turn reduces the state’s attractiveness both to current residents and families looking to find new homes. Instead, factors that were most commonly cited as attractive to movers included employment opportunities, inexpensive housing, and warmer climates.

The rate of interstate migration is actually very low, currently estimated to be around 1.5 to 2 percent of Americans per year, and is projected to drop over the next few years. The vast majority of these individuals said they moved because of “new, transferred, or lost jobs or family-related reasons,” not lower taxes.

Chart via CBPP

Moreover, CBPP’s analysis of Census and IRS data showed that interstate movers are just about as likely to move from a low-tax state to a high-tax state as they are to move in the opposite direction. In fact, over the past 20 years, more people moved from Florida — which has no income tax — to 11 other states with income taxes than residents of those 11 states moved to Florida. When neighboring states that were similar in every aspect aside from tax levels were compared, in many cases, the states with income taxes attracted more new residents that states without. 

Rather, it seems that residents trying to save money would be most motivated to move by lower housing costs. In most cases, mortgage savings far outweighed tax savings for people moving from “expensive” states like California and New York to Florida and Texas, where housing is considerably cheaper. Moving from New York to Texas saves an individual three times as much in mortgage than it does in tax.

Chart via CBPP
Chart via CBPP

This means that states that intend to cut taxes in order to stymie out-migration or attract in-migration are operating from a flawed assumption. And for politicians like Rick Perry, who has made no secret of his attempts to poach businesses and families from other states, promises to catalyze growth and economic prosperity by lowering taxes don’t exactly hold water.

Perry, despite his disastrous 2012 campaign, is likely considering yet another presidential bid. And in preparation for his campaign, the Texas governor has begun airing ads in states with higher tax levels, like New York and Connecticut, in which he urges these states’ residents to make a move to no-income-tax Texas. These ad campaigns have already cost taxpayers $1 million in these two states alone, and have also been run in Maryland, California, Illinois, and Missouri. And while Perry’s office states that “no state tax dollars” are being used to buy each $500,000 ad, this isn’t altogether true.

The “Texas: Wide Open For Business” ads are sponsored by TexasOne, which Perry’s spokeswoman told ThinkProgress draws no money from the state government. However, though “the state does not pay for any of [the campaign’s costs],” the same cannot be said for local governments. ThinkProgress’ review of TexasOne found that at least $465,000 of its funds come from local governments and sales-tax-funded local economic development councils.

So apparently, Rick Perry won’t tax you, but he’ll lie about using your money to talk about how he won’t tax you.

Of course, none of these ads bear any mention of many of the problems that result from Texas’ low tax rates — and, consequently, few state-funded public services — including its high child-poverty rate, high percentage of Texans without health insurance, and continued cuts to public schools.

Texas also ranked 49th in public education spending, so while Perry may be saving taxpayer dollars, he is doing so at the expense of their children’s academic careers.

Unfortunately for Perry, the CBPP’s new report makes it apparent that cutting taxes will not do anything for state in-migration rates. But knowing Perry, he’ll just forget that too.

Photo: Ed Schipul via Flickr

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  • Independent1

    Lulu only touches the tip of the iceberg when pointing out the many socially responsible areas where Texas falls flat. The fact is that Rick Perry has so shortchanged almost everything in Texas aside from feeding money to prospective corporations wanting to relocate that Texas falls flat on many more subjective socially responsible measures.

    Here’s a list of the many measures where Texas ranked very poorly back in 2010 (and it hasn’t changed much if any since):

    .Texas is 49th in the country in tax revenues collected per capita and 50th in revenues spent.
    .Texas is 44th in tax progressivity, which means it collects most of its taxes from working people and
    Texas comes in 50th in the percent of its population that have a HS diploma and Texas is 49th in what it pays its teachers.
    .Texas ranks dead last (50th) in having the most people without health
    insurance and also dead last in the number of children covered by insurance.
    .Texas is 49th in the support it provides to women & children in the WIC
    program, and it leads the nation in teenage births.
    .Texas ranks 6th in the nation in the number of people living in poverty and 50th with regard to the affordability of homeowners insurance.
    .Texas ranks 45th in the overall health of its population and 47th
    with respect to mental health.
    .The quality of the highways in Texas is ranked 42nd and its parks and recreation facilities are ranked 48th and environmental protection 46th
    . Police protection in Texas is ranked 49th and government administration it ranks 50th.
    .Texas comes in 3rd in the nation in the number of public officials that are
    convicted for a crime; while being dead last in the percent of voters who turnout for elections.
    .Texas is 46th in the hourly earnings of its workers and 48th in the payout of worker’s comp benefits.
    .Texas also has the worst healthcare services and delivery in the nation according to the federal Agency for Health Care Research and Quality
    .And Texas ranks as having the most polluted environment in the nation because of all the oil spills and toxic fumes that are spewed by all its oil
    refineries, coal-fired power plants and extensive fracking operations.

  • disqus_ivSI3ByGmh

    Many of the companies that have moved to Texas to take advantage of their tax benefits are now regretting that they do not have a pool of skilled labor to replace employees who could not move due to other family commitments, or would not move due to the socio-political climate against non-Christians (many of them don’t consider Roman Catholics to be Christian), and/or non-whites. And the employees they do hire tend to leave once they have been trained.

    • Independent1

      I wonder how Toyota is going to fare moving to Dallas. It apparently just agreed to move 3,000 people from outside Los Angeles to outside Dallas; another Rick Perry sucker company.

  • johninPCFL

    The article also fails to mention that the new jobs Perry is touting are government jobs. I wonder how he’s paying for all those new government workers?

    From August 2011: “One of every four jobs created in Texas since Perry became the state’s chief executive is in the government sector, figures from the Texas Workforce Commission show.”

    From December 2012: “47% of all government jobs added in the US between 2007 and 2010 were added in Texas.” “Seventy-three percent of the new civilian jobs created in the United States over the last five months are in government, according to official data published by the Bureau of Labor Statistics.”

  • Allan Richardson

    If “shrinking government” were the solution to getting more jobs, Somalia would be an economic powerhouse.