The Freedom Foundation of Minnesota at its Wednesday news conference made numbers sing and dance in explaining why people are leaving the state. But is the foundation dancing to a tune that’s out of key?
At least one state official has questions about their interpretation of statistics.
The foundation describes itself as a nonprofit, educational organization that teaches the importance of individual freedom and limited government. It’s not fond of taxes or, as it turns out, labor unions.
Anyhow, on Wednesday, Annette Meeks, the CEO of the Freedom Foundation, and J. Scott Moody, a tax policy economist, released a report (PDF) saying “thousands of Minnesotans are moving to states with more competitive tax rates.”
Differing takes on out-migration
The out-migration problem, they said, is real and helps explain the annual budget crisis the state faces. To save the state, policy-makers must lower taxes and also do something about those unions, they said.
Minnesota demographer Tom Gillaspy said this morning, though, that the Freedom Foundation’s “study” might be just a bit simplistic.
“The sun rises every morning,” said Gillaspy. “But simply because everybody dies within 24 hours of sunrise doesn’t mean sunrises cause death.”
Gillaspy said he’s been studying migration patterns for three decades and has found that tax policy has little or no impact. In fact, in periods in recent Minnesota history where taxes were much higher than they are now, there was substantial in-migration.
During the 1990s, he said, there were “a lot of jobs in Minnesota. The state was humming. People in their 20s and early 30s, the young families, were moving in. At the same time, the low tax states were hurting.”
Currently, he said, the demographer of Florida reports that the low-tax, union-unfriendly Sunshine State is actually losing population.
Still, Moody seemed extremely confident as he rattled off stats that showed people with higher-than-average incomes leaving Minnesota for more tax-friendly places. He said that IRS data show that the top five places Minnesotans have chosen to go to between 1995 and 2007 are: Florida (21,256 Minnesotans), Arizona (19,605), Wisconsin (9,449), Colorado (6,894) and Texas (6,651).
“People leaving is not a good sign,” Moody said. “The data shows they are leaving for states with lower taxes, lower union membership and more favorable weather.” (He sort of mumbled the weather part of this formula.)
Reporters were squirming in their seats.
“What are the ages of people who are leaving?” a reporter asked.
“The data does not contain ages,” Moody said.
“Is it possible Minnesotans are getting older and moving to warmer climates when they retire?” he was asked.
“Warmer, but lower taxes, too,” responded Moody.
“But if lower taxes are the issue, why aren’t Minnesotans moving to New Hampshire. No state income tax there.”
“Well, ummm. . . .,” said Moody.
Demographer says ‘trend’ not new
In fact, Gillaspy said, men and women of a certain age and income have been leaving Minnesota for decades.
“If you’re healthy and wealthy, you might move to Florida or Arizona,” said Gillaspy. “But God help you if you’re not healthy, because no one else will.”
Both Moody and Meeks admitted there is little Minnesota can do about the climate from a policy standpoint. But both insisted that high taxes and relatively strong labor unions are creating economic woes for the state.
What do unions have to do with this?
“Union membership is a proxy for economic development,'”she said.
Low union membership means lower wages, which means more development.
Go to their numbers.
They say the census shows that between 1991 and 2001, Minnesota gained 100,000 people from other states. But from 2002 to 2009, there was “a total reversal.” Minnesota lost 54,000 people to other states.
At this point, Moody started mixing dates a bit. Between 1995 and 2007, the state lost folks with a combined income of “at least $3,698,692,000.” Had those people — and incomes — stayed, Minnesota would have collected an additional $423,317,000 in taxes, he argued. Lower income-tax collections, Moody said, are a major portion of the state’s budget crisis.
“Minnesota should work toward reducing the tax burden via the income tax, which would encourage people to stay in Minnesota or move to the state,” he said.
Income left the state, his report claims, even in years when there were population gains. That means, he said, that people with higher-than-average incomes are the people leaving.
But Gillaspy says that throughout the country, in these hard times, there is little movement. He also noted that Minnesota’s per-capita income has improved “relative to the rest of the nation.”
Typically, over the decades, Gillaspy said, there is some out-migration of young Minnesotans, those 18 to 24. Much of that, Gillaspy said, reflects those pursuing education. In the 24-to-35 category, the young family demographic, “we tend to gain more than we lose.”
Then, as people approach retirement, the wealthy may move, often to a warm-weather state, though reasons are as complex as individual tastes. Tax rates can be a part of the rationalization, but only a part, he said.
Aging folks, 75 and older, tend to leave the sunshine and return to Minnesota, to be with family and to have medical services not offered in the low tax states.
As for the union “problem”?
“Is the idea that we need to impoverish our workers to compete?” wondered Gillaspy. “Or, do we want a highly trained, well-educated, well-paid workforce? … Florida, Arizona, Texas, these are not prosperous places. Do we really want to be like them?”