Tax deal represents a missed opportunity
Gov. Walz and legislative leaders in the state House and Senate announced the outline of a budget deal Monday morning. Fox 9 reports: The agreement calls for $4 billion in…
Census Bureau data show that, in 2021, Minnesota lost 13,453 residents to other states, its biggest net loss of domestic migrants to other states in at least 30 years. Data also show that the same year, the Twin Cities lost a net of 15,462 residents to other places in the United States, up from a loss of 1,236 the previous year.
There are many reasons people choose to move to or from a place or avoid it completely. The Twin Cities, in particular, struggle with the loss of many cultural amenities thanks to overly draconian — and ineffective — COVID-19 measures. They are also struggling with a rapid rise in violent crime. And our housing is some of the most expensive anywhere away from the coasts. All of these facts will push residents out and deter others from moving here.
Another factor that influences people’s decisions on where to live are the taxes they will pay. A recent paper by economists Henrik Kleven, Camille Landais, Mathilde Muñoz, and Stefanie Stantcheva that “review[ed] what we know about mobility responses to personal taxation” 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 tax policy.
Research shows that wealth taxes, such as estate taxes, also influence migration.
In our recent report ‘Taxes and Migration – Minnesotans on the Move to Lower Tax States,’ we noted Minnesota’s high taxes on income and wealth and found that, as we’d expect, they push people out of our state and deter others from moving here.
So, if you are worried about this persistent drain of residents to other parts of the country, there are a few obvious things you can do. Stop stamping on businesses with ineffective COVID-19 measures. Get a grip on crime with more police and more proactive policing. Cut taxes, fees, and regulations to make housing more affordable. And cut taxes.
Sadly, and all too predictably, the state government proposes to solve the problem by spending $4.5 million on an advertising campaign to lure out-of-state workers to Minnesota.
I’m sure most Americans have heard of Minnesota. And, given recent events, their perceptions of the place are probably not as rosy as they once were.
But if we really want to reverse the exodus of residents to other states — South Dakota and Wisconsin both gained residents from other states last year, so weather isn’t destiny — we need to actually change things here. If we really want to attract residents from other states, Minnesota needs to make them a materially better offer than it is making them now. The money spent on brochures and advertisements will be just more wasted government spending if they aren’t offering anything new.