Minnesota Reformer asks: ‘Are Minnesotans really fleeing to low-tax states?’ Spoiler alert: The answer is ‘Yes’

Last week, Christopher Ingraham of the Minnesota Reformer emailed me to say that he was working on an article on net domestic migration into and out of Minnesota and asked if I could answer four questions on the subject. I was only too happy to assist and the article in question appeared today. It is titled “Are Minnesotans really fleeing to low-tax states?” It is a good, reasonably fair article, and the short answer is “Yes.”

Chris acknowledges that I, and others, are “correct about the numbers: Minnesota has been losing both people and dollars to other states in recent years, according to the latest figures from the U.S. Census Bureau and the Internal Revenue Service.” He then says:

But the net change in any given year is small, representing just a fraction of a percent of the total population. Moreover, the factors driving those migration decisions tend to be a lot more complicated than political soundbites can capture.

Regarding the first point, about the size of the net outflow of residents, he quotes me as saying:

“Now, you can say that [a loss of 19,400 people] is equivalent to losing Hastings and not worry too much,” Phelan of the conservative Center of the American Experiment said in an interview.  “Or you can say that Minnesota’s rate (net number of out migrants per 100,000 of the population) was worse than in 37 out of 51 jurisdictions, and that it is something to worry about.”

You can, then, choose not to worry about these numbers if you wish, although it is worth pointing out that whether a balloon deflates quickly or slowly it still ends up deflated.

But what of the central question, are Minnesota’s high taxes responsible for this ongoing net outflow of people?

Chris notes that:

…tax rates are far from the only factor affecting interstate migration decisions, and many economists say the link between taxes and moving is overstated: “Grossly exaggerated,” in the words of Michael Mazerov of the Center on Budget and Policy Priorities, a left-leaning think tank. Researchers have found that costs of living, job opportunities, recreation, crime and weather and climate have a major influence on where people move.

I am not sure how Chris deduces that “many economists say the link between taxes and moving is overstated” based on a quote from someone at “a left-leaning think tank”. In my email to Chris, I referred to:

…this paper by economists Henrik Kleven, Camille Landais, Mathilde Muñoz, and Stefanie Stantcheva that: “review[s] a growing empirical literature on the effects of personal taxation on the geographic mobility of people and discuss[es] its policy implications” and finds 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.” More specifically: “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 concluded my email by saying:

I think the above about covers it. I would say that taxes are not the only reason people locate in a particular place but empirical research does show quite clearly that they are certainly a reason that people locate in a particular place. If you think this is a problem, and if you also have, as you say, factors like weather and climate going against you, you have to look at your tax policy. ‘Follow the science,’ as they say.

There certainly are more factors than just taxes that drive people’s location decisions. But a state government cannot control some of these factors, such as “weather and climate”, so it needs to focus on the factors it can control. And that brings us back to, among other things, the taxes it levies.