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THE PROGRESSIVE REVIEW - April 14, 2011
Study: Employment, Not Taxes, Drives Families' Decisions
to Move Across State Lines
by: Jeffrey Thompson
The Political Economy Research Institute
If states raise taxes, do residents flee for other states?
Policymakers in New England and around the country face
this question any time they consider new sources of
revenue. In new research from the Political Economy
Research Institute at the University of Massachusetts,
Amherst, Jeffrey Thompson adds new analysis to the body
of research laying this concern to rest. In The Impact of
Taxes on Migration in New England , Thompson analyzes new
data, and finds that the impact of taxes on cross-state
migration is very weak. Other factors?primarily employment
and family concerns?provide the main reasons that families
move.
Amherst - As the New England states continue to struggle
with serious budget shortfalls, policymakers face pressure
to turn to increased taxes to replenish the coffers.
Opponents raise the specter of families fleeing for lower-
tax states in response. But in this new study from Jeffrey
Thompson of the Political Economy Research Institute at
the University of Massachusetts, that concern is laid to
rest. In The Impact of Taxes on Migration in New England,
Thompson analyzes new data, and finds that the impact of
taxes on cross-state migration is very weak. Other factors?
primarily employment and family concerns?provide the main
reasons that families move. 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.
Thompson's analysis finds that employment opportunities in
a state have the strongest influence on migration?people
tend to move into states with lower unemployment rates,
and out of states where jobs are scarce. Similarly, afford-
able housing markets, low levels of property crime, and
higher median incomes attract people to a state. However,
all of these factors result in less migration in New
England than elsewhere in the country. In general, New
Englanders seem to have a habit of staying put.
The study confirms that public services can influence cross-
state migration. By increasing higher-education enrollment,
decreasing property crime, or improving housing afford-
ability, for example, states can attract and retain people.
"Regardless of how they feel about the tax itself, people
value the public services paid for with those taxes," said
Thompson. "Most important for the issue of migration,
though, is the job opportunities that the state government
creates by spending that tax revenue."
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In addition to new analysis using IRS migration data,
Thompson summarizes findings from previous research on
inter-state migration. He highlights the facts that just
3 percent of Americans move across state lines in a given
year for any reason, and 57 percent of adults have never
lived outside of the state in which they were born. Clear-
ly, a very large majority of Americans does not move for
any reason, taxes or otherwise. In keeping with Thompson's
study, previous research focusing exclusively on rich
households and older households has also found that taxes
have little impact on migration decisions.
"The results show that taxes have no measurable impact
on people's decisions to leave a state," according to
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 out-
weighed by job opportunities and other conditions."
"That taxes are not a big driver of migration may shock
some politicians, but is not a surprise to researchers on
this issue," Thompson continues. "People concerned about
attracting people to a state and keeping them there should
really focus on creating jobs, and even be willing to
raise taxes to do it. People are not going to leave a
state because of some modest change in taxes, but they
will leave if public safety deteriorates and if there are
no jobs."
Jeffrey Thompson is a research economist at the Political
Economy Research Institute at the University of Massachu-
setts, Amherst. His work on New England regional tax and
budget issues is funded, in part, by the New England
members of the State Fiscal Analysis Initiative network.
The full study The Impact of Taxes on Migration in New
England, is available at www.peri.umass.edu, along with
a four-page research brief, and an individual research
brief focusing on each of the six New England states.
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