Recently, the Tax Foundation provided a series of posts debunking the key claims made in a left leaning organization’s report. This report concludes, “Contrary to the claims of some conservative economists, there is little evidence that interstate differences in state and local tax levels are significant drivers of interstate migration.” They argue states can counter this by doubling down on raising tax rates, particularly on those with higher incomes, to provide more public services.
This argument that higher taxes leading to a higher cost of living matters little to interstate migration flies in the face of abundant research showing the exact opposite. Economics 101 shows that a higher price of a good decreases the quantity demanded of that good. Put in the proper perspective, a higher cost of living in a state with higher taxes leads to fewer people desiring to live there.
The Tax Foundation’s series of posts provides excellent explanations to show the errors in the report. Below are these posts on the “Facts on Interstate Migration” and their key points:
- Part One: “What we’ve consistently argued at the Tax Foundation is that taxes matter on the margin, but that they’re just one of many factors.”
- Part Two: “To sum it up, “small” migration flows in one year don’t mean migration doesn’t matter. Population demography is a long-term issue, not something that shifts overnight.”
- Part Three: “We agree with Mazerov that there are many reasons for migration, perhaps foremost among them being employment opportunities. But employment opportunities themselves are partly conditioned on taxes, both because better tax codes encourage economic growth, and because tax policy affects employee recruitment for firms.”
- Part Four: “Migrants are often low- and middle-income people seeking a better quality of life and, especially, a better job. They’re people who will uproot themselves and their families from their place of birth and move, pursuing a better life, which often but not always means a place with lower taxes, because good tax policy is a key component of economic prosperity.”
- Part Five: “State policymakers are right to be concerned about migration in relation to taxes. But they should be careful to clearly explain that the main economic effect of better tax policy isn’t directly on migration, but on broader economic growth. Net inward migration is a positive side effect of economic growth and better tax policy (insofar as tax policy promotes growth), and shouldn’t be the fundamental goal of tax changes.”