Ohio University Prof. Richard K. Vedder has written more than 100 migration studies during more than 40 years of work as an economist. Recently, he said the data suggest Michigan residents increasingly believe the quality of life is, or soon will be, better in places other than Michigan.
“This should be a wake-up call for makers of public policy to take actions to make the state more attractive, like lowering the price of government services via reduced taxes,” Vedder said.
Vedder has repeatedly found a negative relationship between taxes and migration–even when many other variables, such as sunshine, are factored into the analysis. In other words, there is a correlation between high taxes and people moving out of a state.
This is confirmed by a study of how the elderly respond to different incentives, “Elderly Migration and State Fiscal Policy: Evidence from the 1990 Census Migration Flows.”
Writing in the National Tax Journal in March 2001, economists Karen Smith Conway of the University of New Hampshire and Andrew J. Houtenville of Cornell University found the elderly as a group “are attracted to states that exempt food and sales taxes and spend less on welfare. Low personal income and death taxes also encourage migration, depending on how these taxes are measured.”
Business Tax Huge Burden
In the most recent legislative session the Michigan legislature debated doing away with the Single Business Tax (SBT), which is highly complex and can result in businesses paying taxes even when they make no profit. According to advocates of SBT reform or elimination, reducing the SBT could help stem the flow of residents to other states by making Michigan more attractive to job providers.
Early this year Michigan lawmakers passed a plan to speed the elimination of the SBT, but Gov. Jennifer Granholm (D) vetoed the bill. Under current law the SBT will expire in 2009. (See “Michigan Governor Vetoes Repeal of ‘Jobs-Killing’ Tax, Budget & Tax News, June 2006.)
Leon Drolet (R), a commissioner in southeast Michigan’s Macomb County, is one official who would like to do away with the SBT. He also opposes replacing the $1.9 billion in net revenue the SBT generates with a new tax.
“You don’t remove cancer cells and ask what to put in their place,” said Drolet. “The best way for Michigan to overcome competitive disadvantages such as cold weather and its hostile labor climate is to dramatically reshape tax policy. Killing the SBT will announce that Michigan has reopened for business.”
— Michael LaFaive
