State and Local Tax Rates Have Little Effect on Peoples’ Decisions to Move

CBPP’s analysis adds to “growing body of authoritative research” that people do not move because of tax rates

Augusta, Maine (Thursday, May 8, 2014) The non-partisan Center on Budget and Policy Priorities (CBPP) today released a new report,  State Taxes Have a Negligible Impact on Americans’ Interstate Moves, that dispels the myth that state and local tax rates are a major factor influencing the decisions people make about where to live.
“The CBPP report is the latest in a growing body of authoritative research that debunks the claim that state and local tax rates are a driving factor in peoples’ decisions about where to live,” said Garrett Martin, MECEP executive director. “Claims that people choose to move from states like Maine with a progressive income tax to states like New Hampshire that do not have an income tax are unfounded.  MECEP’s own analysis of IRS tax data found that between 1996 and 2010, Maine experienced a net gain from New Hampshire of 1,787 tax families comprising $145 million in income. CBPP’s findings provide a compelling case against Gov. LePage and others who continue to argue for tax policies that cater to Maine’s wealthiest residents at great expense to the rest of us, our schools, and our communities.”
The CBPP report, authored by Michael Mazerov, a senior fellow with the Center’s State Fiscal Policy Project, specifically cites the Maine-New Hampshire comparison as a prime example of the fallacy of the tax-migration link:
“New Hampshire lost migrants to income-taxing Maine and had little net in-migration. Overall, New Hampshire lost almost as many households to other states as it gained. Its lack of an income tax did not prevent some 373,000 households from moving out from 1993-2011, only slightly fewer than the 389,000 who moved in. All of New Hampshire’s net in-migration was attributable to in-migration from Massachusetts, mostly from the Boston metropolitan area.More than a quarter of the workers in such households continue to work in Massachusetts, and their migration is not driven by the absence of an income tax in New Hampshire since they would still pay income taxes on their wages and salaries to Massachusetts. Finally, Maine, which imposes the ninth-highest top income tax rate of any state, experienced net in-migration from New Hampshire from 1993-2011.”  
CBPP’s research also discredits the claim by many opponents of Maine’s income tax that it drives more affluent and better educated people to leave Maine for states with a lower or no income tax.
“The available data . . . fail[s] to support claims that much interstate migration is driven by high-income people – or anyone else – consciously choosing low-tax locations,” the report found. 
“Most people cite job- and family-related reasons for moving,” said MECEP economist Joel Johnson. “Basic analysis of census data shows that very few people move across state lines because of differences in state and local taxes. Climate and housing costs are also much more important factors than state and local tax rates in peoples’ decisions to move.”
To obtain a copy of State Taxes Have a Negligible Impact on Americans’ Interstate Moves, click here.