It's not ~ebil socialism~ it's forcible sharing of toys, ok?

[mephisto5]

Tax Flight Is a Myth
Higher State Taxes Bring More Revenue, Not More Migration

Attacks on sorely-needed increases in state tax revenues often include the unproven claim that tax hikes will drive large numbers of households - particularly the most affluent - to other states. The same claim also is used to justify new tax cuts. Compelling evidence shows that this claim is false. The effects of tax increases on migration are, at most, small - so small that states that raise income taxes on the most affluent households can be assured of a substantial net gain in revenue.

• Migration is not common. Most people have strong ties to their current state, such as job, home, family, friends, and community. On average, just 1.7 percent of U.S. residents moved from one state to another per year between 2001 and 2010, and only about 30 percent of those born in the United States change their state of residence over the course of their entire lifetime. And when people do relocate, a large body of scholarly evidence shows that they do so primarily for new jobs, cheaper housing, or a better climate. A person’s age, education, marital status, and a host of other factors also affect decisions about moving.
• The migration that’s occurring is much more likely to be driven by cheaper housing than by lower taxes. A family might be able to cut its taxes by a few percentage points by moving from one state to another, but housing costs are far more variable. The difference between housing costs in two different states is often many times greater than the difference in taxes. So what might look like migration in search of lower taxes is really often migration for cheaper housing.
  
  Consider Florida, often claimed as a state that attracts households because of its low taxes (Florida has no income tax). In the latter half of the 2000s, the previously rapid influx of U.S. migrants into Florida slowed and then reversed - Florida actually started losing population. The state enacted no tax policy change that can explain this reversal. What did change was housing prices. Previously, the state’s lower housing prices had enabled Northeastern homeowners to increase their personal wealth by selling their pricey houses and purchasing a comparable or better home in Florida at a lower price. But housing prices in Florida rose sharply during the mid-2000s, narrowing opportunities for Northeasterners to “trade up” on their expensive homes. And consider California: its loss of households to other Western states is often ascribed to tax differentials, but - as this report shows - housing-cost differentials are typically much, much larger.

• Recent research shows income tax increases cause little or no interstate migration. Perhaps the most carefully designed study to date on this issue concerned the potential migration impact of New Jersey’s 2004 tax increase on filers with incomes exceeding $500,000. It found that while the net out-migration rate of this income group accelerated after the tax increase went into effect, so did the net out-migration rate of filers with incomes between $200,000 and $500,000, and by virtually the same amount. At most, the authors estimated, 70 tax filers earning more than $500,000 might have left New Jersey between 2004 and 2007 because of the tax increase, costing the state an estimated $16.4 million in tax revenue. The revenue gain from the tax increase over those years was an estimated $3.77 billion, meaning that out-migration - if there was any at all - reduced the estimated revenue gain from the tax increase by a mere 0.4 percent.
• Low taxes can prevent a state from maintaining the kinds of high-quality public services that potential migrants value. Studies show that such amenities as cultural facilities, recreational opportunities, and good public services are powerful attractions for potential migrants. Many of those services are financed with tax dollars. Therefore, while low taxes decrease the cost of living, they might also prevent states from preserving or improving valued public services, which would discourage potential migrants.

Thus, while a few affluent households might leave a state because their income taxes are increased, the vast majority stay, and states gain a significant net increase in revenue to help support important services.
Against this evidence, anti-tax advocates, policymakers, and journalists continue to rely on a few deeply flawed studies and incomplete anecdotes to back up the taxation-migration myth. Among the most-often cited examples:

• A business-financed Oregon study received much attention for purporting to show that Portland residents were moving to Washington State to avoid Oregon’s higher income tax in general and a temporary increase in the county where Portland is located in particular. But the study failed to take key facts into account. For example, Oregon taxes the wages of people who work in the state even if they live elsewhere, so people who continued to work in Oregon could not avoid paying Oregon income tax on their wages by moving to Washington. In addition, a local economic boom in Portland and other factors were causing housing prices to rise faster on the Oregon side of the border than on the Washington side during the period the study covered. In all likelihood, whatever net migration was occurring reflected housing price differentials (as well as other potential factors) more than tax differentials - but the study didn’t adjust for that.
• High-profile critics of New Jersey’s above-mentioned tax increase - from the state’s governor to the Wall Street Journal - for years have pointed to a Chamber of Commerce-commissioned study showing that, starting in the same year the state enacted the measure, the total wealth of millionaires leaving the state began to exceed the total wealth of millionaires moving to the state. The study, however, was not designed to measure the potential impact of tax changes on those migration patterns; nor did it find a tax impact (its author acknowledges as much). Most of the people the study examined weren’t subject to the tax increase, since the study covered families with a net worth of $1 million or more, many of whom have less than $500,000 a year in taxable income. Nonetheless, the governor is still incorrectly claiming this study as evidence of a tax-migration effect.
• Critics of Maryland’s 2008 tax increase on income over $1 million point to the sharp decline that year in the number of filers in the state with taxable incomes exceeding $1 million as evidence that wealthy residents were fleeing the state. But an examination of actual tax return data shows that the vast majority of this decline occurred not because people moved out of the state, but because their incomes fell below the $1 million mark due to the recession and stock market crash; they remained on the tax rolls, but in a lower tax bracket.

It would not be credible to argue that no one ever moves to a new state because of the desire to live someplace where taxes are lower. But neither is it credible to say that taxes are a primary motivation, nor that migration has a large impact on the revenue impact of tax measures.

This is just the executive summary. The full report, produced by the Centre on Budget and Policy priorities, is given below and is also worth reading for those with the time to spare and a pot of good tea.  It is obviously US-centric, but I suspect may be applicable to all westernised countries.

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