Report: Tax Hikes Don't Push High-Income People to Move

St. Paul, Minn., August 4, 2011 - Raising taxes on high-income people does not cause them to move out of state, according to a national study released today. The study by the Center on Budget and Policy Priorities (CBPP), a nonpartisan, nonprofit policy research organization, reviewed a variety of research and data, and found that Americans move for many reasons, but state taxes rarely factor into such decisions.

The study comes shortly after Minnesota policymakers debated proposals to increase taxes on high-income households as a sustainable way to fund the state’s priorities. The tax increase would avoid deeper cuts to critical services like our schools, health care, and programs for seniors and people with disabilities. The tax increase would also help narrow the gap between the relatively smaller share of income that high-income Minnesota households pay in state and local taxes, compared to other Minnesotans. Opponents argued that increasing taxes on high-income households would cause people to leave Minnesota.

The CBPP study looked at states that increased taxes on high-income households and concluded that higher taxes generally do not cause people at any income level to move out of state. People more frequently move because of job opportunities, housing costs, climate and family.

“The effects of taxes on migration are, at most, small — so small that states that raise income taxes on the wealthiest households will see a substantial net gain in revenue,” said Robert Tannenwald, co-author of the report and senior fellow at CBPP.

“This study provides more evidence to support a balanced approach to our state’s needs, including raising revenues,” said Minnesota Budget Project Director Nan Madden. “Currently, low- and middle-income Minnesotans pay a higher share of their incomes in total state and local taxes than the wealthiest Minnesotans. We need to close that gap and use the funding to invest in our state’s economic future. Failing to raise the resources we need to maintain strong schools and universities and safe, vibrant communities will hurt us now and in the long run.”

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The Center’s full report is available online.

ATTENTION TV PRODUCERS: High-resolution video sound bites featuring the report’s co-author, Jon Shure, are available upon request. Please contact: Shannon Spillane, Center on Budget and Policy Priorities, 202-408-1080.

The Center on Budget and Policy Priorities is a nonprofit, nonpartisan research organization and policy institute that conducts research and analysis on a range of government policies and programs.

The Minnesota Budget Project, an initiative of the Minnesota Council of Nonprofits, provides independent research, analysis and advocacy on budget and tax issues, emphasizing their impact on low- and moderate-income Minnesotans.