The Longest Vacation

Recently the Mackinac Center, a think-tank based in Midland, Mich., released a report on the traffic of United Van Lines, a moving company. By this move-out measure, Mackinac found that New York had the sixth-highest rate of out-bound traffic in the country for the first six months of 2007.Nearly 58% of all UVL traffic in New York was out-bound to other states. While UVL is only one of many moving companies in New York, Mackinac Center scholars have econometrically discovered that UVL data is highly correlated with state-to-state migration patterns. New York policymakers should be very concerned about this most recent revelation since it foretells another year’s loss of population to other states.Unfortunately, this sign of out-migration is nowhere near a one-time fluke. New York has been hemorrhaging people in every year since the U.S. Census Bureau has been keeping tabs on annual domestic migration. Between 1991 and 2006, New York has lost 3,078,898 people to other states, or roughly one person every two minutes and 45 seconds. If domestic migration were the only source of population change, New York would have lost almost five seats in the House of Representatives. Fortunately, immigrants are compensating for about 62% of the outflow.Clearly, people are voting with their feet. Politicians in Albany and city halls throughout the state should pay close attention to this stampede out of the state. While many factors are responsible for this out-migration, New York’s highest in the nation level of taxation stands above them all.For example, we have all heard of the snowbirds, New Yorkers who move to Florida not only for the sunshine, but also for the 30% drop in taxes. Here is more evidence that I have gathered to show that low-tax states are gaining citizens at the expense of high-tax states. First, consider that, between state fiscal years 1994 and 2004, the 10 lowest-taxed states had an average tax bite of 9.5% of personal income versus 13% for the 10 highest-taxed states. As such, the tax bite of the lowest-taxed states was 27.2% lower than the highest-taxed states. Not surprisingly, the lowest-taxed states enjoyed an overall population growth rate that was higher by 172.1% — 17.5% versus 6.4%.Second, if you divide all states evenly based on tax burden, of the 25 states with a tax burden below the median, only six — 28% — have lost population to other states since 2000. On the other hand, of the 25 states with a tax burden above the median, 17 states — 68% — have lost population to other states since 2000. And all the big domestic migrant gainers, such as Arizona, up 541,283; Florida, up 1,221,540; and Texas, up 451,910, have tax burdens below the median.Sometimes one gets the feeling policymakers are arrogant about this, but they might keep in mind that when people move, so do their wallets. Since 1996, the Internal Revenue Service has published a dataset that allows researchers to track not only the movement of taxpayers, but also their incomes.The data shows that between 1996 and 2005,New York has lost $38,139,573,000 of nominal income to other states. More disturbingly, the annual losses have recently accelerated to $5,266,985,000 in 2005 from $3,478,584,000 in 2003 — a 51% increase. In this case, immigration is of little help since the IRS reports the median immigrant’s income is only $8,005 while the median domestic outmigrant’s income is $28,022.The IRS data also tells us where New Yorkers are going. The top 10 destinations in 2005 all have significantly lower tax burdens: 1. Florida, 30.2% lower 2. New Jersey, 22.1% lower 3. Pennsylvania, 26% lower 4. North Carolina, 28.6% lower 5. Georgia, 31.5% lower 6. Connecticut, 20.6% lower 7. Virginia, 31.5% lower 8. California, 23.2% lower 9. Maryland, 28.5% lower 10. Arizona, 27.1% lowerDue to this flight of taxpayers and their income, I have estimated that New York state and local governments have lost approximately $5,268,805,000 in tax collections to other states between the 1996 and 2005 time period. How many more billions of dollars in revenue will be lost before someone stops the exodus?The political lesson is simple — cutting taxes will not only encourage more folks to stay, but it also will result in higher future tax collections. After all, government cannot tax that which moves away.Mr. Moody is president of Economic Analysts, Inc., a public policy consulting group, and has more than 10 years of tax policy experience at the federal, state, and local levels.

The Longest Vacation

The Longest Vacation

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