We can’t change the weather, but we can lower taxes
Report from American Experiment details stubborn relationship between taxes and migration
Building on previous American Experiment reports, Taxes and Migration: Minnesotans on the Move to Lower Tax States reviews the evidence on the impact of taxes on migration and unfortunately shows our state continues to lose population and subsequently productivity and income to other states. The report takes a deep analytical dive into tax burdens in Minnesota compared to other states and their impact on net migration, explaining why the patterns we see offer cause for concern, both for future economic growth and the state government’s fiscal sustainability.
The report showed the state suffered an alarming net domestic loss of 9,757 people in 2020, the third largest net loss of residents to other states in thirty years. A big reason for the net loss in population is the fact that people are not choosing to move to Minnesota anymore from other states.
Behind the raw population data, Minnesota policymakers should be concerned with who is leaving the state regarding their economic output. The report shows a net inflow of domestic migrants in every income category below $50,000 annually, but a net outflow at every income level above that. That imbalance will contribute to Minnesota’s decline in productivity and subsequent loss in income tax revenue over time.
“At the risk of hurting our Minnesota pride, this report shows once again the danger signs in our economic future, especially as it relates to losing people and the capital they produce,” said John Phelan, author of the report and economist at Center of the American Experiment. “Entrepreneurs, philanthropists, civic volunteers and plain old taxpayers will continue voting with their feet if we don’t change course in Minnesota.”
Taxes are driving population loss to other states
The report sought to examine the relationship of migration to and from other states with the overall tax burdens in those states. It found with some exceptions that people are moving to Minnesota from states with higher taxes, and moving from Minnesota to state’s with lower taxes. In fact, the detailed analysis found tax burdens to be a significant factor in migration, accounting for 25.8 percent of the variation in migration ratios.
“Minnesota is a cold weather state, so we already have that working against us when it comes to migration between the states,” added Phelan. “The good news is, tax policy can be changed to make our state a more attractive place to live, work and retire. In other words, we can’t control the weather, but we can control state policy.”
The full report can be found on American Experiment’s website at: