PoliGraph: Will tax increases prompt people to flee the state?

During debate over the House tax bill last week, Rep. Linda Runbeck made this common argument: If the Legislature raises taxes, people will move and take their tax dollars with them.

"This bill is going to cause jobs to leave. It's going to cause the successful people to leave. It's going to cause the productive, hardworking people to leave," she said. "About $4 billion from Minnesota has left to go to states that are lower taxed states. That's the trend. $2 trillion has moved across state lines over the last 15 years... and where is it going? It's going to the low tax states in the country."

It's true that Minnesotans leave the state every year, sometimes for places like Florida and Arizona that have lower taxes. But they leave for lots of reasons - including winters that haven't ended by early May.

The Evidence

The House tax bill would impose a fourth-tier income tax rate of 8.49 percent on couples with an annual taxable income of $400,000 or more and an additional temporary surcharge on couples making more than $500,000 after deductions.

Runbeck points to several sources to support her claim that people will flee the state, including a 2010 report by the conservative Freedom Foundation of Minnesota that looked at why Minnesotans leave.

The report found that between 1995 and 2007, people who left the state took roughly $3.7 billion in income with them. Those households - particularly wealthier ones - migrated all over the United States, but most went to Arizona, Florida, Colorado, California and Texas, according to the report.

(Data from the Tax Foundation, a group that advocates for lower taxes, shows a slightly different trend. During that period of time, most Minnesotans left for Wisconsin, followed by California, North Dakota, Texas and Florida.)

Runbeck also points to How Money Walks, a book written by Travis Brown that shows that Americans have taken $2 trillion in adjusted gross income across state lines over the last 15 years.

But there are some flaws in Runbeck's statement.

First, between 1995 and 2007, Minnesotans migrated to states that didn't necessarily have a more favorable income tax climate. California is an example.

Secondly, people left Minnesota for a lot of reasons, and taxes are just one of them, says Richard Morrison, who is a spokesman for the Tax Foundation.

"There are any number of reasons why someone might choose to move from one state to another," he said. "There are a bunch of financial reasons, and the tax burden might be one of them. But there are different things, like whether this is a place where you want to retire, this is a place you want to move because it has nicer weather, whether you want to be closer to family."

Jobs and cheaper housing are also reasons people tend to leave one state for another.

It's true that slightly more people are leaving Minnesota for other states than are coming here. But former state demographer Tom Gillaspy said Minnesota is doing pretty well when migrants from other countries are taken into account.

Gillaspy also said that high taxes don't necessarily lead to out-migration.

"In the nineties we saw more net inflow of people in higher income brackets and that was when taxes were higher," Gillaspy said. "And during the Pawlenty administration, we had less of an inflow and more of an outflow."

State demographer Susan Brower said that most of the people leaving Minnesota are either college age or retirees, two groups that are more likely to migrate in the first place.

The Verdict

Runbeck's claim has some truth to it: more people have left Minnesota for other states in recent years, taking with them tax dollars. In some cases, Minnesotans migrated to places that have lower taxes. At least one report pegs the amount at $3.7 billion - nearly the $4 billion Runbeck states.

However, her overall point doesn't hold up. Runbeck implies that these tax dollars are leaving Minnesota because of the state's tax structure and that more will leave if the Legislature decides to increase taxes on the state's wealthiest.

There's no evidence to suggest that's the case because people leave Minnesota for lots of reasons.

Runbeck's claim is misleading

SOURCES

Freedom Foundation of Minnesota, Minnesota's Out-Migration Compounds State Budget Woes, February 2010

The Tax Foundation, Migration Data Interactive, accessed April 25, 2013

The Internal Revenue Services, Tax Stats-Migration Data, accessed May 2, 2013

Amazon.com, How Money Walks, by Travis Brown

Rep. Linda Runbeck, R-Circle Pines

Richard Morrison, spokesman, Tax Foundation

Susan Brower, Minnesota State Demographer

Tom Gillaspy, former Minnesota State Demographer

Ryan Brown, spokesman , Minnesota Department of Revenue

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