The Guadalajara-Minnesota Connection
As new markets open up, entrepreneurs rush in to fill the demand. An alert reader sent me this picture taken yesterday of a bus parked at a south Metro hotel.…
In March 2021, I testified in a hearing of the House Committee on Taxes on yet another proposal to hike our state’s already high taxes. I said that there was empirical research showing that high taxes were one factor driving migration from one state to another and that, if we hiked our taxes even further, this empirical research should lead us to expect the population outflows Minnesota has seen in recent years to continue or, even, accelerate.
I was told by one of the committee members — who claimed some expertise in economics — that there was no such empirical research. I produced a copy of this research, a 2019 National Bureau of Economic Research (NBER) working paper titled “Taxation and Migration: Evidence and Policy Implications” — and when I say produced, I mean I actually held up a printed copy of the paper for everyone to see. This committee member, former Rep. Jennifer Schultz (DFL), changed tack, admitting that, yes, the research she had said didn’t exist a couple of minutes earlier did, in fact, exist, but that it was only a working paper that hadn’t been published in a journal. In fact, the NBER is fairly prestigious and, anyway, she was wrong again: an updated version of the paper had been published in the Journal of Economic Perspectives in 2020.
In this version of the paper, economists Henrik Kleven, Camille Landais, Mathilde Muñoz, and Stefanie Stantcheva “review[ed] a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss[ed] its policy implications.” They found that:
There is growing evidence that taxes can affect the geographic location of
people both within and across countries. This migration channel creates another
efficiency cost of taxation with which policymakers need to contend when setting
This body of work has shown that certain segments of the labor market, especially high-income workers and professions with little location-specific human capital, may be quite responsive to taxes in their location decisions.
I tell this story because Minn Post’s Peter Callaghan has written an admirable guide to the debate on taxes and migration with special reference to the debate in Minnesota. In it, he quotes Governor Walz saying:
“Those who would come up here to tell you that folks are going to leave Minnesota, they’re going to eviscerate us,” Walz said. “First of all, the data doesn’t support it…”
He also quoted Eric Harris Bernstein, “coalition director of We Make Minnesota, an organization supported by labor unions and DFL-supporting organizations,” as saying:
…the idea that we are witnessing some mass trend of migration for tax purposes, there’s no evidence of that.
Both of these statements are, to be polite, “untruths,” as was Rep. Schultz’ assertion back in 2021 that the paper in front of her didn’t exist. The data does support the argument that high taxes are one reason people leave some states, like Minnesota, for others, like Florida, and it is certainly not true that there is “no evidence” that people move for tax purposes. The empirical research shows that they do.
There has, of late, been a newfound willingness among the state’s progressives’ to face the empirical reality of high taxes and their role in driving residents from Minnesota. It is rarer, now, to encounter the sort of denial I encountered in that hearing in March 2021. But it is not unheard of, as Callaghan’s article shows. The sooner these folks ‘follow the science,’ the better the policy debate in Minnesota will be.
Photo: opencampusmedia via Twitter
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