Minnesota’s Economic News — W/E 7/1/22
State and local taxes and spending CBS News: Scott Jensen seeks tax cuts to help Minnesotans cope with inflation Willmar Radio: Jensen wants to eliminate state income tax Voice of…
Americans are moving around less than they used to. Even so, in 2017, nearly 5.5 million Americans moved from one state to another. Using Census data, a recent report from North American Moving Services showed where these people were from and to. The top ten inbound states were Arizona, Idaho, North Carolina, South Carolina, Tennessee, Florida, Oregon, Georgia, Colorado, and Texas. The top ten outbound states were Illinois, Connecticut, New Jersey, California, Michigan, Pennsylvania, Minnesota, New York, Maryland, and Washington.
So why are Americans leaving the second set of states and going to the first? There are all sorts of reasons: housing, jobs, family, but the relative shape of the state’s economies play a role too. How so?
In an article for the Washington Post, economists Meg Tuszynski and Dean Stanse argue that there is a strong correlation between economic freedom and whether a state gained or lost residents. “Using data from the Fraser Institute’s annual “Economic Freedom of North America” report,” they write, “we find that people prefer to move to states with lower taxes, more reasonable levels of government spending, and friendlier labor markets.”
According to our calculations, the top ten inbound states had an average rank of 14.1 out of 50 on the EFNA index (that is they had on average the 14th highest level of economic freedom). How did the top ten outbound states fare? They had an average rank of 32.0 — more than double.
In the report, economic freedom is defined thus
Individuals have economic freedom when (a) property they acquire without the use of force, fraud, or theft is protected from physical invasions by others and (b) they are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others. Thus, an index of economic freedom should measure the extent to which rightly acquired property is protected and individuals are engaged in voluntary transactions.
Research shows that economic freedom is positively correlated with per-capita income, economic growth, greater life expectancy, lower child mortality, the development of democratic institutions, civil and political freedoms, and other desirable social and economic outcomes.
As I wrote in December, Minnesota ranks 40th among the states for economic freedom. Given the many wonderful things about our state, it is sad, if unsurprising, to see our state ranked among the ten outbound states.
John Phelan is an economist at the Center of the American Experiment.