A groundbreaking new report by the Center of the American Experiment (henceforth CAX) shows what a lot of us are seeing in our own lives, social circles and workplaces: Minnesota sucks, and people are leaving.
Says the CAX:
There’s no question that Minnesota’s tax policies directly impact economic growth and opportunity in the state. There is, however, great debate over whether Minnesota’s current tax policy and the proposals being considered in St. Paul promote or harm economic growth. Those who favor a higher tax rate argue Minnesota needs more revenue to fund the education and infrastructure necessary to sustain economic growth. Advocates for lower taxes argue Minnesota needs low rates to make Minnesota an attractive place to invest, work and grow a business.
Like most economic questions, making the direct connection between state tax policy and economic growth is difficult. As William McBride—chief economist at the Tax Foundation—admits, “the economy is sufficiently complex that virtually any theory can find some support in the data.”
And there will, no doubt, be controversy about this report (which you should read). But it’s conclusion (of sorts, with emphasis added):
Though data can deliver mixed messages, data from the Internal Revenue Service (IRS) point to one clear and worrisome fact: Minnesotans and their wealth are moving to Southern and Western states. Between 1995 and 2010, an average of $340 million in income—based on 2010 dollars—moved each year from Minnesota to other states—a movement totaling more than $5 billion over 15 years. The states that on net receive the most Minnesota income tend to be low tax states such as Arizona, Colorado, Florida, Georgia, Nevada, South Dakota, Texas, and Washington.
“But wait!”, someone might interject. “Of course people leave. They retire to someplace warmer!”
But there are five – count ’em, five (5) – reasons this doesn’t seem to be the case.
Working Stiffs: For starters – would retirees move to Sioux Falls?
First, many of the leading destination cities are economic centers, not retirement centers. Retirees certainly account for a large portion of the people and income leaving Minnesota. Some of the places receiving the largest portion of people and income from Minnesota include retirement destinations like Naples, Fort Meyers, and Scottsdale. But there are a large number of economic centers in the South and the West that are clearly attracting many more workers than retirees. Cities like Atlanta, Seattle, Dallas, Austin, Sioux Falls, and Denver have all gained substantial numbers of people and income from Minnesota…if Florida and Arizona were removed from the list, the income from receiving states would still far outweigh the contributing states.
Working people have joined the retirees, in other words.
You Have To Retire To Be A Retiree: The Great Recession slowed retirement migration nationwide, as people either couldn’t afford to retire, or couldn’t afford to move anywhere warm:
Second, as migration and retirement slowed during the Great Recession, Minnesota continued to lose substantial income to low-tax states in the South and the West that are not the locus of retirement.
The net movement of income to Florida dropped from $149 million in 2008 to $77 million in 2009, the first time Minnesota lost less than $100 million to Florida since 1996. The movement of income to Arizona also dropped substantially. Despite these drops, most of the other top states receiving income from Minnesota showed either no change or a bump in the income received from Minnesota.
Both Texas and Georgia gained more income inboth 2009 and 2010, while states like Colorado, Washington, South Dakota and North Carolina remained in a normal range.
All The Cool Working Kids In Liberal Hellholes Are Doing It: Minnesota isn’t the only high-tax “progressive” cesspool experiencing this problem:
analyses of the movement of income to and from other states show similar patterns of movement from high tax states and to low tax states.
In his book How Money Walks, after analyzing the same IRS data set for the entire country, Travis Brown concludes: “When you look at the mapped data over this period of time an unmistakable pattern emerges: income moved from high-tax states to states with no personal income taxes or lower per capita taxes.”11 In addition, a recent Manhattan Institute report documents the “exodus” from California
http://www.shotinthedark.info/wp/wp-admin/media-upload.php?post_id=36025&TB_iframe=1&width=640&height=607 using the data.12 The authors found, “as a general rule, Californians have tended to flee high taxes for low ones.” Thus, California, a state with a similar tax climate to Minnesota but very different weather, is experiencing similar migration patterns.
Big question there: is Minnesota becoming a cold California, or is Cali becoming a cold Minnesota?
It’s Everywhere: It’s on page 11 of the report (I said go read it, dammit), but I’ll show it to you here:
Look at all of your high-tax “progressive” cesspools – New England, New York, Jersey, California? Warm, cold, old and stodgy or young and full of “creative class” hypstrz – they’re all hemorraging people.
It’s The Young Workers, Stupid: The fifth conclusion? Younger workers in their prime earning years are not moving to Minnesota:
The people considering a move tend to be younger and looking for better jobs and economic opportunities. Table 1 [on page 3 of the report]shows a steady decline in the average size of the households moving to Minnesota, dropping from households with 1.94 exemptions per return in 1996 to 1.75 in 2010. This drop suggests that fewer families are choosing to make Minnesota their home.
We’re getting an influx of college students and lonely drifters. Families in their peak earning years? Not so much.
The conclusion? The CAX puts it diplomatically:
The data reviewed in this report show first and foremost that Minnesota is consistently losing the battle to attract people and income to the state. Year after year the state on net loses thousands of people and undreds of millions of dollars. Regardless of how large the loss is, it is a loss which demonstrates Minnesota is not competing well with the rest of the country. That’s a fact that should be worrisome to every Minnesotan.
I don’t need to be diplomatic; the data show us that tough economies and high taxes didn’t even mix in the 2000s, when we had a government that was split between bobbleheaded spendthrift DFLers and responsible Republicans, and we held onto sanity by our fingernails.
I can’t tell you the number of middle-class, hard-working, tax-paying people I know who’ve told me to pencil them in for anything happening more than 6-12 months out; they’re looking to move someplace where they aren’t forced to be happy to pay their hard-earned income for a Minnesota that just gets worse and worse.
And at some point, we get to where we are nationally with income tax (more takers than givers). Like California, high tax states will reach a typing point were enough higher income earners (what liberals and MSM call “the rich”) move out, while more people come in to get free stuff (ever wonder why Minnesota EBT cards are frequently spent in Chicago) and you reach a point of no return.
Your voting population is heavy with rich liberals (not high income earners, but those like Dayton and Crazy Al Franken) and those who get free stuff. The rich liberals will promise more free stuff and will always be in charge.
Listening to DFL’rs justify their tax increase(s) on MPR this morning has moved me into the column of “looking to move elsewhere”. I’m not a native so I don’t have any illusions that this place is or was better than elsewhere because all the children here are above average due to our shining education system.
What I see is a repeat of my family’s experience in Detroit – Government taxes the crap out of the people who have something to tax. Then acts shocked when the tax revenue is less than they projected because the people that could headed out the exits. Raise tax rates again and more people with anything to tax leave. Repeat the process until all that’s left are public employees (who are required to live in the juridiction) and those poor folks dependent on the system. Bancruptcy is the next stop.
Speaking of Detroit, maybe we need an emergency manager statewide? :^) At the very least, we need some adult politicians who understand the difference between subsidies for politically favored businesses and a really good business environment.
BTW, Mitch, I rode to work today. Awesome ride.
But for The Crash, I would already have sold my house and moved. I wonder how many more are like me, and what the numbers would have looked like had Democrats not worked their economic magic to prolong the housing crisis for the last five years?
Joe, hopefully you have “done the math.” I have three friends that bailed for TX within the last four years, selling their houses at losses of $78,000, $122,000 & $155,000 respectively. With the savings in sales tax, income taxes, gasoline, all but the last one claim to have fully recouped the losses within 2.5 years and 155 says that he will do so by March of 2014. TX does have relatively high property taxes though.
Rick’s retiring in about 5 years. We’re heading for Casper, Wyoming then.
Republicans, low taxes. Even without the warm winters.
This is the land of loons. And they outnumber us because they have created little liberal factories which keep pumping out more liberals. In spite of our constant warnings, they are going to step into the bear trap of believing taxes create wealth. Retirement is not too far off the horizon for me and Mrs. Stink and there is no way we will keep contributing to support this cesspool of liberal lunacy we call “home.” We’ll be gone. And, we’re taking our money!
And, we’re taking our money!
You lie, blogger Berg. No one I know is leaving Minnesota’s HIGH QUALITY OF LIFE for the miserable existance in one of your Red cesspools of H8!
Apparently, Dipsy Dayton hasn’t read these studies, because he’s “heard that (people will leave) story for the last 30 years and it hasn’t happened.” Another libturd meme supported!
I agree with Swiftee. We’re paying for a higher quality of life. So, it must only be the ignorant who are leaving us. Isn’t that good?
And I’ll raise him one. Someone must be hiding the statistics that show the true demographics and socio-economic data of those who are moving here. There is a noticable recent influx of those who were not born here. I suspect that by including these new citizens, their wealth, cultural contributions, and added diversity, Mr. Berg’s theory would be proven false.
Anyone catch the Governor’s displeasure at the crowd’s response to his salary increase support at a Shakopee town meeting today? It was determined by the media to be “unruly” and “heckling.”
If a reaction were the same to Michelle Bachman, the media would have commended the group’s spirited free expression of ideas.
Someone’s getting an extra cookie before bed tonight …
Minnesotans deserve a better tax system than we have now. We can raise the same amount of revenue in a way that spreads the burden more equally across income groups and that makes the tax code simpler.
Mr. Pawlenty appointed a tax-reform commission and ignored its findings, but the Legislature and the governor could pick it up and use it as a road-map for tax reform. The commission recommended, in particular, a broader sales tax (with a consequently lower rate), a simplified income tax system, and reform to both household and business property taxes. The commission’s report is a starting point to achieve a better tax system for Minnesotans.
Just import foreigners to supply the low paying service positions that the elderly, relatively well-off native-born rely upon. Better yet, make sure they are poor and have no desire to assimilate.
That ought to create a stable culture of caring and mutual respect. Until the new arrivals can vote themselves the native’s money.
Emery, I doubt people leave Minnesota because of sales tax inequity. I suspect they’re leaving because the overall tax burden is too high for what you get. Add income tax, sales tax, gas tax and special licenses and taxes for hunting, fishing, boating . . . it’s not worth it.
It’s not a matter of making the tax burden more fair; it’s a matter of reducing the tax burden. If that only can be achieved by shutting down parts of Minnesota government, SITD readers can provide you with a list.
That attitude you refer to (“making the tax burden more fair”) comes from regarding the collection of taxes as a crusade for righteousness and justice rather than a means of gathering revenue. Value added and other flat taxes are very good for collecting revenue because they aren’t easy to escape (broad base, low rates). They do not, however, punish the wealthy for being wealthy. To do that you need income and property taxes which in turn are worth evading, and less efficient. Inefficient in this case means that as you raise the rates, the amount of money you collect per rate increase goes down as it becomes increasingly worthwhile to pay to avoid those taxes.
To make a system with flat taxes more ‘fair’, the benefits derived from those taxes must be spent disproportionately on those most in need, rather than equally on the citizenry. So, for instance, a government provides healthcare free for the poor but charges progressively more for richer people. All of the high tax countries in the world use flat taxes extensively, and strongly direct their benefits to the poor. Lower tax countries such as the United States have some of the most ‘progressive’ taxes in the world (i.e. the proportion of taxes that come from the wealthy), but dole out benefits universally, which often means that the rich receive the greatest benefits (higher mortgage deductions, more Medicare because they live longer, etc.). So in practice, the US system, with highly progressive tax rates (half the population pays no income tax) and universal benefits, ends up taking money from the rich and the middle class and handing it right back to them, with the poor paying nothing and receiving close to the same. Systems that rely on flat taxes and highly directed benefits, typical of northern Europe, collect more revenue and spend much more on those who most need it, yet the citizenry objects less to the taxes they pay, because the tax base is so broad.
So folks using the “tax fairness” argument along with their simplistic ratios, should learn something about the realities of taxation and what works in practice. High rates of taxation of income and profits are far more deleterious to economic output than taxation of consumption, because they discourage innovation and investment, and encourage the hiring of clever tax accountants and lawyers. Crucifying fat cats on a cross of high marginal income tax rates may be terribly satisfying to an overdeveloped sense of moral indignation, but it doesn’t raise enough revenue, and it doesn’t provide benefits for the poor.
People like to quote the high marginal income tax rates in the Eisenhower era, but leave out some key facts. Those high rates brought in less in taxes than we bring in now as a fraction of the economy, and paid for far less benefits (no Medicaid, no Medicare) than we do now. What allowed those benefits were flat taxes on income and lower rates on a broader base of income. Move from flat taxes on income to flat taxes on consumption, and direct the benefits to the poor rather than everyone, and we might actually see some social justice in this country. Will that make the rich any richer or poorer? No, but it might put a few tax accountants out of a job. Spend a little more time worrying about how to help the poor, rather than how to punish the rich.
As an aside:
I encourage SiTD readers to run (support) a gubernatorial candidate that will resonate with enough voters to achieve that end. Or perhaps the base (caucus attendees) will once again let ideological purity trump electability.
Minnesota: The death of a thousand fees.
Emery, why do you hate success so much? Why do you advocate confiscation of wealth and its redistribution? You “sound” so reasonable, and yet your “soci@list” worldview of steal from the rich and give to the poor to buy their vote is seeping from every word. Fact that taxing and then denying benefits is a worst type of progressive tax escapes your tortured logic and undermines and destroys your “arguement” for consumption tax.
Emery, you write thoughtfully about fairness in tax theory to provide better services. But I didn’t suggest that the tax burden should be made more fair. I suggested it should be made cheaper all around. And I’m obviously not alone in that request.
The data show people leaving high-tax, high-services states (Minnesota, New York, Illinois) for low-tax low-services states (Texas, Arizona, Florida). That means taxpayers don’t want the services government offers at the prices government offers them. The taxes are just too high for what we get.
It’s not a fairness problem, it’s a fleeing problem. Tinkering with the tax tables won’t solve that problem at all.
In other words, “We have a spending problem”. But then Emery never met anyone or anything which problems, real or perceived, could not be solved by government intervention and throwing more taxpayer money at it.
Figures don’t lie but leaving out important facts works just as well. In the 1930 census the US population was 123,202,624, in the 2010 census it was 308,745,538 an increase of about 2.5. During this period, Minnesota’s population grew at about 2.0. Some high tax, union friendly states grew at a much higher than average rate California(6.56), Washington (4.3) and Hawaii, (3.6). Some states which are low tax and anti-union (apparently the ideal) also grew at a rate higher than the US as a whole examples are Florida 3.33 and Texas (4.3). However, many states with low taxes and a non-union economy grew much more slowly than Minnesota. Missouri (1.6), Nebraska (1.3), Mississippi (1.47), South Dakota (1.17), North Dakota (-.04), Montana (1.6) etc.
People live places for lots of reasons, taxes are not the largest reason for most people. Most of us choose to live in Minnesota because we love the place. If taxes are the most important reason you choose to live or do business in Minnesota you are clearly in the wrong place.
I was referring to those (and governor) who use talking points about “tax fairness” to rationalize their revenue positions or policies.
Turn that frown upside-down..
Emery, I appreciate that you believe that government can be done right — at one time I would have agreed with you. At some point, however, I began to believe that the reason that government never seemed to be ‘done right’ is that there are powerful forces that prefer that government be done wrong. They profit from it.
Hence the need not to tweak the taxing power of the government, but the need to first reduce the government’s power to tax at all.
Since the task of government is to require us to do those things that we don’t want to do, I don’t want it to be good at what it does.
“..there are powerful forces..”
You have every right to be concerned. One word: Lobbyists (of all stripes)
(BTW: my last comment on “War Pigfords” was not directed at you.)
Sorry I misunderstood who your comment re Pigford was directed to, Emery.
I’m an American conservative. I recognize that there are hard limits to what the government can do, at the Federal level, especially. It is too rarely mentioned that the federal government is the level of government that is least responsive to small-d democratic influence, while of course it is the most powerful level of government.
If you substitute the word ‘petitioner’ for the pejorative ‘lobbyist’, I think you’ll understand what I mean. If we do not have the right to petition the government, that is, to tell it what we think it should do, we have tyranny. If we get rid of lobbyists (or campaign donations), what basis will the government have for making laws? Guesswork?
If the government is extremely powerful — if it can make or break entire industries with a bureaucratic rule change — and it is influenced by industry lobbyists, that is bad. If it has that power but cannot be lobbied by the members of industry, that’s bad as well.
We’ve addressed this in the past.
Since you (legitimately) brought up context, lets go all in. The economy – nationally and regionally – has changed drastically since 1930. Many high-tax union states thrived from 1945-1973; it helped that there was no competition. Low-tax right to work states shrank – because agriculture shrank (at least in terms of population).
Context over 80 years is an interesting data set, but there’s plenty to be found in smaller slices.
If taxes are the most important reason you choose to live or do business in Minnesota you are clearly in the wrong place.
It’s the incentives and disincentives on the margin that result in the biggest change.
Much of the economic growth around the Great Lakes in the middle of the last century was driven by the Second World War and the consumer-driven economy that followed it.
Missouri’s period of high economic growth ended when it lost its position as the ‘gateway to the West’. Blue state/red state won’t make much difference if you don’t have some source of natural or geographic source of wealth that can be leveraged.
@Terry, That was very well put.
The United States was built with an explicitly federal system where the federal government was given very limited responsibilities, with far greater rights and responsibilities falling on the states, localities and individuals. Unfortunately, wars (Civil, WWII, Cold) and race relations (slavery, then civil rights) put us in difficult spots which allowed the federal governments of Lincoln, FDR, and LBJ/Nixon to seize more power for the federal government, and in particular the president. Those powers were used for the best in most cases to solve those crises, but once the feds had new powers, they never gave them back.
The United States is too big and diverse, in demographics, geography, and economy, for any detailed federal program to work well. The federal system works best when the federal government preserves negative rights of the citizenry and the states, while states and localities focus on positive legislation like social programs and economic management. The federal government is responsible for delivering us freedom from fear of foreign enemies, freedom to trade internally and as much as possible externally, freedom to move between the states, freedom from inflation and other property confiscations, and the other Bill of Rights freedoms (all negative rights). By collecting federal taxes and providing funding for certain activities favoring the poor and disadvantaged (social programs, disaster relief, some infrastructure), the federal government provides negative economic feedback that benefits all.
But management of social programs in detail, most infrastructure spending, and all positive economic management is best handled by the states and cities. First, because the states can tailor their programs much more specifically to a much less diverse population and economy. Second, because of the overall freedoms of commerce and movement guaranteed by the federal government, and because of the need to balance budgets, states are eventually forced to back away from inefficient and impractical policies, or face the loss of investment dollars and their best and brightest citizens to other states (no, this doesn’t imply a race to the bottom).
While it may sound like a nasty Republican trick to avoid paying for social programs, making the federal healthcare (Medicare and Medicaid) and unemployment programs into block grants to the states (with stabilizers written into the formulae) would clear the way for a tremendous wave of reform. I guarantee you that 50 or more flowers of reform would bloom, some more austere than Singapore, some more generous than France. And eventually we would settle on sensible solutions that fit each state’s desires, because in the end the states are all forced to be relatively sensible. The federal government can throw money at a problem, but it cannot create and reform efficient social and economic programs. It is constitutionally incapable. The US needs to re-learn that lesson.
Thanks for the considered reply, Emery.
You sound more like a federalist than a libertarian in your 7:26 post.
In my heart I believe that to save the United States, the federal government I love, the statist reforms of the early 20th century need to be rolled back. Obama and the dems have figured out how to get 52% of the vote, but by doing so they have to spend 25% of GDP while only taxing 18% of GDP. This will lead to calamity.
The broad interpretation of the commerce clause needs to be rolled back. The precedents set in the late 30’s and 40’s could be overturned, they were narrow decisions based on the politics of the day, not a strict interpretation of the constitution. There was a time when the left abhorred the idea of holding to precedent solely for the sake of holding to precedent.
The 14th should be repealed or clarified. The SC rulings on the 14th are all over the map, it’s essentially meaningless as a part of constitution. Since no one is now alive who was once a slave, it neither requires nor forbids any specific action by the government.
The 16th amendment should be abolished. It gives congress the right to tax income at whatever level it chooses to, and it has been interpreted to allow congress to consider ‘income’ to be whatever congress defines as income. It is anathema. I’ve got nothing against paying taxes, but the 16th amendments a terrible thing. As long as it is in place, the statists and wannabe tyrants will find the idea of using the federal government as a means to achieve utopia too appealing.
Needless to say, liberals consider the 8th, 14th, and 16th amendments to be holy writ. They think that it would be death to see them go.
The point is that a chart showing how many people are leaving the state means little unless viewed against overall population stability. Since 1930 we have had two huge national economic calamities, nearly constant war, at least three huge swings in the nations economic center of gravity, and our population has grown only slightly less than the national average. Just as tax levels alone say little about our social,cultural, or economic strength, so too does your graph on out-migration. My measure of a place is; do you want live there? The desirability of my state as a place to call home is not measured by taxes, I don’t like the economic, intellectual or community atmosphere in most low tax states like Texas, Florida, Oklahoma or Mississippi, I’ll venture you don’t either. Thank goodness some people do otherwise they might all move here. Minnesota has historically a stable population, very competitive economic growth, relatively high taxes, a union friendly economy and snow in May; what could be better?.
PM, you sure are a snob and missing the point – history is being rewritten by the libturd progressives in Minnesota, apparently to your liking. All that is going to be left are coffee shops with provocative names where your alpaca wearing, patchouly smelling, reefer smoking, intellectual metrocrat and metrosexual trust find baby community will congregate. Hey, you can even form a union!
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You say “a chart showing how many people are leaving the state means little unless viewed against overall population stability.” Which is fine, to understand the broad sweep of history. But as the stock brokers’ disclaimers remind us, past performance is no guarantee of future results” – which is another way of saying “history can mislead”.
Example: The ore boat Edmund Fitzgerald, in its 20 year career, made hundreds of voyages. It delivered millions of tons of ore, losing only about 1% of its aggregate total over the decades. And of the roughly 400 men who ever plied a passage on the Fitz, all but 29 survived. That’s 93%. The hull operated at a mean depth of zero feet below lake level; over time, the exceptions were outliers. Pretty good: in the largest context, the Edmund Fitzgerald was a safe ship.
It was really only that last trip that was the problem. 0% cargo delivered, 0 out of 29 crew survived, hull ended up with a mean depth of 500-odd feet.
So the larger context is fine – and misleading, if your question is “how’s the ship doing?”
Minnesota, as you note, has a long history with ebbs and flows. Just like the Fitzgerald. But the wind is blowing, it’s getting damp below decks, and there’s a banging from the main loading hatch, and history may not be all the context that matters at the moment.
“I don’t like the economic, intellectual or community atmosphere in most low tax states like Texas, Florida, Oklahoma or Mississippi..”
I happen to be writing this from San Antonio Texas. Ever been here, PM? The architecture, food, night life, art all make Minneapolis look like a little girl wearing mom’s dress and high heels.
And people…yes, people. Last weekend was San Antonia Fiesta. Three days of music, food and as much alcohol as you care to drink….and guess what? Although there was plenty of deep drinking going on, I didn’t see one drunken brawl, one besotted partier being dragged into a cop car, no discord anywhere.
Ever been to St. Paul on St. Patty’s day? Minneapolis on gays on parade day?
I doubt many lefties that denigrate them so smugly have ever been to the places they mock…and I’m pretty sure the people that live in those places are glad of that.
Alabama and Mississippi have reasonably fair and workable electoral systems (now). They get the politicians they deserve. Alabamians and Mississippians put up with them because they matter relatively little. If those federal dollars upon which those states are so dependent were channeled through state run social programs, the state government would matter a great deal more, and the people of those states would make change happen. Or possibly not. But if not, then those citizens are still getting what they deserve.
States can surprise you — Oklahoma has universal government funded pre-school.
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