Employment Opportunities, Not Taxes Motivates People to Leave Maine

Study findings reinforce MECEP’s arguments against irresponsible tax cut proposals currently pending in the Maine Legislature
Augusta, Maine (Wednesday, April 13, 2011) — The Maine Center for Economic Policy (MECEP) praised the findings of a new study released today by the University of Massachusetts, Amherst’s Political Economy Research Institute (PERI) that “employment and family concerns provide the main reasons that families move [from one state to another.  And family ties, comfort with their community, jobs, the costs of moving, and valuing the public services in their state are why families stay put, regardless of their state’s tax rates.”  Jeffrey Thompson, keynote speaker at MECEP’s March 4th State Tax and Budget Conference, authored the study entitled The Impact of Taxes on Migration in New England.

“Jeffrey Thompson’s data reinforce MECEP’s arguments against irresponsible tax cut proposals currently pending in the Maine Legislature,” said MECEP Executive Director Christopher St. John. “The PERI study builds on previous studies that taxes are not dominant factors in people’s decisions about moving, and that tax cuts will not have much effect on migration between Maine and other states.  The PERI findings also reinforce MECEP’s case that massive cuts in services for working families resulting from tax cuts favoring the wealthy undermine prosperity and economic growth.” 

The PERI analysis found that a state’s employment opportunities have the strongest influence on people’s decisions to move from one state to another.  Families are more likely to move away from states with high unemployment rates and into states where employment opportunities are more promising.  Other factors which greatly influence migration decisions include housing affordability, low property crime, and higher median state income. PERI noted that above and beyond all of these factors, “New Englanders seem to have a habit of staying put.”  PERI’s analysis also revealed that Maine’s out-migration rate has been lower than the other New England states except Massachusetts.  Maine’s in-migration has been higher than the other New England states except New Hampshire in recent years. In the most recent year studied, 2006, Maine was the only New England state with modest net positive migration.

“The results show that taxes have no measurable impact on people’s decisions to leave a state,” said study author Thompson. “Once households have decided to relocate—because of job loss, divorce, or whatever other reason—they seem to be slightly influenced by the taxes in their potential destination states. Even in choosing a destination state, though, the impact of taxes is relatively small and outweighed by job opportunities and other conditions. ”  

The PERI study analyzes annual IRS migration data for 1988 to 2006, to determine the impacts of economic as well as fiscal factors on migration, including measures for income taxes, sales taxes, total state and local government revenues, crime, and educational services.

“Regardless of how they feel about the tax itself, people value the public services paid for with those taxes,” Thompson added. “Most important for the issue of migration, though, are the job opportunities that the state government creates by spending that tax revenue.”

“This study is yet more proof that the Legislature should reject the proposed reduction in the top income tax rate and the substantial tax reduction for 500-600 very large estates,” added MECEP Fiscal Policy Analyst Dan Coyne.