I found an interesting map included in an article I was reading yesterday which, to me, speaks volumes about our future if we maintain our present course.
We have all heard the argument that if more revenues are needed tax rates can be raised. Those of us who try to point out the folly of this approach attempt to remind proponents of higher taxes that many people are willing to move to more tax advantageous locations to escape the tax rates, only to be accused of being the “Chicken Little’s” who warn of the economic sky falling because government intervention in the economy. We are told that people choose where to live, and will pay whatever taxes are required for them to live there. Let’s see if I can help clear this up by having you look at the following map, put together by taxfoundation.org:
As you look at the map, you will see that the dollar figures are either gains or losses. These numbers are the ten year change reflecting the net aggregate incomes of the people who chose to move from one state to another. Although it does not correspond 100% to various tax rates of the different states, it is apparent that the higher the taxes in a state, the more people leave, while the lower the tax rates, the more people tend to move to that state.
So, thanks to the research of the Tax Foundation, we can see that there is a distinct correlation between the interstate migration of wage earners and the differing tax rates between the several states. It is not a precise correlation, but it is clear to see, nonetheless. People, it would seem, do move at times to escape higher taxes and other government inflicted costs. Here is just one example.
In the ten year period from 2000 to 2010, Minnesota lost approximately $3.5 billion dollars income from which to derive tax revenue, which income then went to other states where the tax burden was lower. That is the same as saying that, on the average, Minnesota’s economy was reduced by $350 million dollars a year due largely to unfavorable government policies. How much better would our economic situation be now had we added that amount to our economy instead of subtracting it?
Who were the people who left? They were the people who could afford to. The people who would tend to spend more money in the local economies, because they could afford the luxuries they wanted. The people who were most likely to operate their own businesses, hiring employees and buying business supplies, raw materials, fuel, and office space or leases. These people have taken their money to other states.
Meanwhile, here in Minnesota, we continue to try to raise more revenue by increasing taxes and fees, making it ever more profitable for a person or business to move to a state where they can save thousands of dollars per year, or more. And so taxes go up, yet revenue goes down, leading to further calls to increase taxes yet again, as if a wise business operator will never realize the amount of money to be saved annually by operating in a cheaper state. When will we learn? Must we completely destroy our economy before we realize that we can not draw business by being hostile to business? Or will we childishly accuse the states with lower taxes and costs of sabotaging us, as if it were their fault that we can not run our state as efficiently as they do theirs?
We can see the same thing happening in our own back yards. Wonder why it is cheaper to live outside of Grand Rapids than in? Taxes and fees. In the most recent annexation inflicted by the city, it was not at all uncommon for the newly annexed residents to complain that their taxes went up significantly, some of them tripling. If there are any of these people reading this, we would be more than happy to tell your story for you, just let us know in the comments.
Let’s return to some economic common sense and quit strangling our currently weak economy by tying the weight of taxes around its neck. It’s time to loosen the reins and let the economy run, building up both revenue and jobs in the process.