Joseph Stiglitz: Tax rates are a driver of migration
In his book The Euro, Nobel Prize winning — and decidedly non-conservative — economist Joseph E. Stiglitz writes:
Countries compete to attract firms, capital, and highly skilled workers, and one way they do so is through lower taxes. With such easy mobility, it is similarly hard to have very progressive taxes. Rich individuals threaten to leave and locate themselves and their businesses elsewhere.
If we swap “states” for “countries” at the start of that quote, we have a decent summary of the situation in the United States.
It is worth noting that Stiglitz is talking about mobility in the European Union, specifically the eurozone, so moving from Greece to Germany or Poland to France. If differences in tax rates are a factor driving movement from Warsaw to Paris, with the huge language and cultural distances between the two, how much greater is that effect likely to be when we are talking about the move from St. Paul to Sioux Falls, where those barriers are effectively non-existent?
I wrote recently that:
Among empirical economists there is little doubt that taxes are one factor which determine the location of individuals and businesses. Only in the bizarro world of Minnesota’s public policy debate do people persist in denying what the empirical evidence shows. Babbittry dies hard. [Emphasis added]
Stiglitz, it seems, would agree.