Friday, August 05, 2011

Tax flight is a myth: new study

From the Center on Budget and Policy Priorities in the U.S.:
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.
The arguments they make in support of these assertions are:
  • Low taxes can prevent a state from maintaining the kinds of high-quality public services that potential migrants value (TJN: duh!)
  • Migration is not common.
  • Recent research shows income tax increases cause little or no interstate migration. Non-tax factors are the big ones.
  • The migration that’s occurring is much more likely to be driven by cheaper housing than by lower taxes
And it also demolishes other studies claiming the opposite. A useful and important piece of work.

But it won't stop people and companies continuing to use the tax flight myth as a weapon to threaten elected legislatures.


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