New Study: Jobs—Not Taxes—Stimulate Migration

MONTPELIER—Vermont shouldn’t worry that higher taxes will drive people away, but how it spends its tax revenue appears to affect the likelihood that people will move here. Employment opportunities, a low incidence of crime, and affordable housing go hand in hand with greater inward migration.

Those were among the key findings of a new migration study released today by the Montpelier-based Public Assets Institute and the Political Economy Research Institute (PERI) of Amherst, Mass. The study was based on migration data from all 50 states, but focused specifically on the effects in the New England states.

“The results show that taxes have no measurable impact on people’s decisions to leave a state,” according to Jeffrey Thompson, a research economist at PERI and the author of the study, The Impact of Taxes on Migration in New England. “Once households have decided to relocate—because of job loss, divorce, or whatever other reason—they seem to be slightly influenced by the taxes in their potential destination states.” Even in choosing a destination state, though, the impact of taxes is relatively small and far outweighed by job opportunities and other conditions, according to the report.

“This new research should put to rest claims we’ve heard for years about tax flight,” said Paul Cillo, president of Public Assets Institute. “Our own research and recent analysis by the Blue Ribbon Tax Structure Commission have shown that people moving to Vermont consistently have more income than the people who leave the state each year. If tax flight, especially by the wealthy, was happening, we should be seeing an income drain; instead we’re actually seeing more income.”

“The report suggests that how a state uses it tax dollars can make it more attractive,” Cillo continued. “Over the 18-year period analyzed, there was a consistently strong correlation between people moving to a state and greater job opportunities, lower crime rates, and the availability of affordable housing.”

Thompson’s study was based on migration data from all 50 states collected by the Internal Revenue Service between 1988 and 2006. He also looked at Census data and reviewed economic literature on migration patterns and tax policy.

“That taxes are not a big driver of migration may shock some politicians, but is not a surprise to researchers on this issue,” Thompson said. “People concerned about attracting people to a state and keeping them there should really focus on creating jobs, and even be willing to raise taxes to do it. People are not going to leave a state because of some modest change in taxes, but they will leave if public safety deteriorates and if there are no jobs.”

Critics of Vermont’s tax structure often point to New Hampshire as a model. However, Thompson also found that when looking solely at outward migration, people consistently have left New Hampshire at a greater rate than residents have left Vermont or the other states in the region.

Public Assets Institute is a non-profit, non-partisan organization that researches and analyzes state fiscal policy. It is a member of the State Fiscal Analysis Initiative (SFAI) coordinated by the Center on Budget and Policy Priorities in Washington, D.C. Jeffrey Thompson is a research economist based at the Political Economy Research Institute at the University of Massachusetts and funded, in part, by Public Assets Institute and the other New England members of the SFAI network.

The Impact of Taxes on Migration in New England is available at the Public Assets Institute website (https://paivt.wpengine.com//resources/what-others-are-saying/the-impact-of-taxes-on-migration/)

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