We've moved!

Social Icons

twitterfacebooklinkedinrss feed

Thursday, March 19, 2009

From New Jersey to Ortonville, Taxes Don't Drive Migration of Wealthy

South Dakota's fiscal regressives like to pretend that our low taxes, including the absence of an income tax, are a great draw for getting folks to move here.

Reality will pop at least part of that balloon: a report in yesterday's New York Times makes clear that rich people just don't base their mobility on tax policy:

...[T]here is surprisingly little evidence to support the proposition that rich New Yorkers would bolt if forced to pay higher income taxes. Though tracking the movement of wealthy taxpayers from state to state is difficult, experts on public finance and migration say they have yet to document a substantial “rich drain” in states that have raised income taxes in recent years.

“At the level we’re talking about, there’s no quantitative evidence that it affects the mobility decisions of affluent taxpayers,” said Douglas S. Massey, a demographer at Princeton University and president of the American Academy of Political and Social Science [Nicholas Confessore, "Taxes Not Seen as Making the Rich Flee New York," New York Times, 2009.03.18].

New Jersey did see a little wealth-flight after 2004 when it raised its income tax 2.6% on folks making over a half-million a year. 50 to 350 "half-millionaire" households left the state—less than 0.1% of households in that tax bracket. That emigration cost the state maybe $38 million... but folks who stayed and did their civic duty chipped in $895 million more.

Confessore also points out that California's high taxes haven't driven residents of Silicon Valley to Sioux Falls yet:

Also in 2004, California voters approved a 1 percent income tax surcharge on personal income over $1 million, and Silicon Valley and Beverly Hills appear to remain well populated with the wealthy. From 2004 to 2007, according to a study by the California Budget Project, a left-leaning research organization, the number of millionaire taxpayers rose by close to 50 percent, well outpacing the 8.6 percent growth in the total number of those paying personal income tax.

“It is one of the oft-cited urban legends in California politics — that the rich are leaving California because of higher taxes,” said Jean M. Ross, the project’s executive director [Confessore, 2009.03.18].

As a local example, consider the Big Stone City–Ortonville metroplex. These two towns straddle the South Dakota–Minnesota border at the southern tip of Big Stone Lake. They are one mile and two bridges apart. If tax policy dictated migration the way South Dakota politicians like to say it does, we should expect hordes of poor downtrodden Minnesotans to hop the border to homestead in Big Stone City while commuting the extra mile to their jobs in Ortonville... or better yet, to just forsake Minnesota completely and build their businesses on the sunnier shores of the Whetstone River.

But if you've driven through Big Stone City and Ortonville, you know that's not the case. Big Stone City has a population of 549. Ortonville has a population of 1,980 (and like so many Minnesota towns, looks bigger than South Dakota towns of comparable population). Ortonville's main street has much more activity than Big Stone City's. Big Stone City does have a higher per capita income, but it also has higher poverty rates, especially among kids and senior citizens.

statistic Big Stone City, SD Ortonville, MN
population (2007)
549 1,980
per capita income $19,297 $17,132
median household income $41,659 $38,264
poverty 11.2% 9.2%
families in poverty 7.4% 7.2%
children in poverty 17.7% 9.5%
folks 65+ in poverty 16.5% 10.1%
median house value
$72,508 $88,593
new single-family
permitted, 1996–2007

Perhaps some of Ortonville's wealthy elites have snuck across the river and settled in that little arm of Big Stone City along Lake Drive, but Ortonville is still seeing more building and better general welfare for families and Main Street. After years of different state tax policies, Ortonville is still the bigger town.

Culture and other factors—"school, jobs, even the weather"—have much more to do with migration than tax policy. There are other economic arguments to make about the wisdom of various tax policies, but let's put the canard about tax-driven migration to bed.


  1. A report in yesterday's New York Times makes clear that rich people just don't base their mobility on tax policy.

    How much do the folks at the Times know about middle-income people in South Dakota who are struggling to pay their bills right now?

  2. I just heard that IL is raising their state income taxes 50%. I think SD should target IL and offer them our low tax state to move to. We have a lot of people in Madison who could use a job offered by a company moving from IL to SD.

  3. You know, Anon, my wife and I both wondered something similar yesterday while listening to NPR Weekend Edition Saturday's story about a couple who moved from Maine to California last year hoping to find better economic opportunities. "California?" we asked. "If you're going to move, why not come to South Dakota, where you can stretch your savings farther while you look for work?"

    But there's the point: people don't move as much because of the taxes they pay as for the opportunities they can find. That couple from Maine? The wife is a theater director and radio producer; the husband is a photographer. What jobs would they have found in South Dakota? They didn't say, "Hey! South Dakota won't tax our income!" They said, "Hey! California offers a better chance to make income!"

    Following the thesis of the Times article above and the choices of the couple in the NPR report, could it be that people are more willing to bank on their ability to turn their talents into income that will pay for their dreams and their tax obligations as citizens rather than shop around for the state government that hands out the biggest tax breaks to their bracket?

  4. Fifty percent income tax hike? It would have to be Illinois, wouldn't it? The ether fairly reeks of the irony. Don't anybody light a match.

    People don't move as much because of the taxes they pay as for the opportunities they can find ...

    ... or create, say I!

    I hear all this talk about jobs. How about people start businesses of their own? Dad-burn the excuses. Find something people need or want, and then do it better than anybody else in the world. And then, for God's sake, show up on time.

    I'd love to see a brand new theater, a brand new radio station (with eclectic music), or a brand new photography studio. Tell those Maine-to-California transplants to come to Paha Sapaand make their own things happen.

    South Dakota is, and remains, a great place for entrepreneurs, in part because of the low taxes and the relative lack of red tape. You want all that? Okay. But please leave at least one refuge in the world where people who have a half-pint of initiative can keep from being pursued and pawed to death by every government wonk's bloody tax and regulation.

    Oh -- don't tell those Maine-to-California transplants that we could have up to five feet of snow in the next forty-eight hours. It might make them think twice.

  5. [Five feet?!? Holy cow! Spring does bring the juicy blizzards, doesn't it? Head to the store while you can!]

    It's pretty hard to make the case that California's tax system has stifled innovation and creativity. Silicon Valley, Hollywood... Seems real success is more about talent and ambition than accommodating tax structures. And I find unaffordable private health insurance much more of an obstacle to entrepreneurial risk-taking than any tax.

    Stan, check the NPR story, Google that Maine/L.A. couple, and extend them that invitation to the Black Hills. If you can get 'em to come, we all win! (But notice: not once in their story do they mention California's or Maine's taxes as a reason they moved.)

  6. And I find unaffordable private health insurance much more of an obstacle to entrepreneurial risk-taking than any tax.

    Now on that we agree, Cory.

    I moved from Florida (low taxes and low rents) to California (high taxes and high rents) in 1997, motivated by a friend's promise that my awful sinus headaches would diminish "out west." And do you know what? They did!

    All other things being equal, low taxes and low cost of living make it easier to start a business. But of course, all other things are never equal. I even managed to stay afloat in Hawaii, where costs and taxes are probably the worst in the United States.

    But I couldn't live without the snow. Sheesh.


Comments are closed, as this portion of the Madville Times is in archive mode. You can join the discussion of current issues at MadvilleTimes.com.

Note: Only a member of this blog may post a comment.