Does Minnesota have a problem of folks fleeing the state?

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.

Tom Gillaspy
MinnPost/Daniel Corrigan
Tom Gillaspy

“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?”

Comments (11)

  1. Submitted by Ambrose Charpentier on 02/11/2010 - 12:54 pm.

    How does Annette Meeks find time to be CEO of the foundation and also serve as one of my representatives (for Minneapolis) on the Met Council? I can hardly think of anybody who could be less representative of the people who actually live in Minneapolis.

  2. Submitted by Phil Tichenor on 02/11/2010 - 01:16 pm.

    There was another, recent, disconfirmation of the idea that MN taxes drive business away. It was in the Strib within the past week; a survey of MN business owners underwritten by Health Partners. The pollsters asked these owners to select from a list of “obstacles” that their businesses face. Top pick (by 21%) was health costs. Down the list, “taxes” was picked as a major obstacle by 7%, with various other obstacles in between. The “taxes drive businesses away” is an old political myth, repeated in spite of lack of evidence. Finding a single case or two is as fallacious as citing one person’s “success” with a particular drug as proof that it works.

  3. Submitted by Lance Groth on 02/11/2010 - 01:30 pm.

    I’m so tired of these self-centered yahoos who became successful because of the gifts given to them by the society they live in, but who feel that they don’t have to pay their dues in return.

    As I heard Jerry Springer (an amazingly thoughtful man) say recently on Shatner’s Raw Nerve, sure, they were smart enough and hard working enough to take advantage of the opportunities provided by society, but being positioned to do so is due purely to luck. No one chooses the circumstances of their birth, the family they’re born into, the socio-economic status into which they’re born, the health they’re born with, or their mental or physical abilities. This is all a throw of the dice. If Bill Gates had been born in Ethiopia, he wouldn’t have created Microsoft. It was being born in America, with all the opportunities provided by the American system, that enabled him to make the most of his abilities. That includes the things government does – educational opportunities, infrastructure, health care, a peaceful, well governed society in which you don’t have to worry about being shot by a sniper or drafted into a militia gang, or where your next meal or drink of clean water is going to come from.

    Minnesota, taxes and all, has for many decades been in the upper tier of states on quality of life issues. Businesses did well, the state and the citizens prospered, and those who prospered the most – the Daytons, for example – recognized an obligation to give back to the society that fostered their success. Warren Buffett and Gates himself have spoken of the need to repay society, specifically including paying taxes.

    If you’re privileged, it’s called “noblesse oblige”. For the rest of us, it’s called civic duty.

    Those who whine about taxes, especially my favorite the “Taxpayers League”, or “Tax Evaders League” as I prefer to call them, have benefited from what Minnesota’s high quality of life and opportunities have provided them, but are devoid of any sense of responsibility or gratitude for it, and certainly don’t feel they have to pay anything back. They have the conceit that their success is all due to their wonderful abilities and nothing else. Hubris in the extreme.

    Minnesota has been slipping in many measures in recent years, but it has nothing to do with anyone moving away. It coincides with the advent of Pawlenty’s policies here in Minnesota, and W’s nationally. They can try to lie with statistics all they want, but thankfully we have dedicated public servants like Gillaspy to call them on it.

  4. Submitted by Eric Larson on 02/11/2010 - 03:21 pm.

    Mr. Gillaspy is usually a good source of information. In these partisan times, where even supposedly non partisan offices are producing political documents, you can usually count on Mr. Gillaspy’s office to report all the facts.

    But his last comment in the article really rankles me. “Florida Texas and Arizona, these are not prosperous places”. He is two thirds wrong on that. AZ and TX have lower unemployment rates then the nation and are falling. They are the states that are gaining congressional seats while we fight decade after decade to hold 8 seats.

    Can someone tell me why lower unemployment rates and population gains are not a sign of prosperity?
    What is it with the educated elite in this state that hates Texas, anything near Texas or people from it?

  5. Submitted by Brian Simon on 02/11/2010 - 03:50 pm.

    “Low union membership means lower wages, which means more development.”

    Promoting lower wages may be good for business owners, but its not so great for the employees. Do we really want to be the kind of state that is trying to expand the labor pool with the lowest paying jobs possible? These business owners might think they’re coming out ahead, but who’s going to buy their products if we keep pushing wages down?

    Eric Larson asks
    “AZ and TX have lower unemployment rates then the nation and are falling. They are the states that are gaining congressional seats while we fight decade after decade to hold 8 seats. … Can someone tell me why lower unemployment rates and population gains are not a sign of prosperity?”

    I don’t know what Mr Gillaspy’s response is, but it may be along the lines of per capita income. Yes, having a low unemployment rate is good, but having a high proportion of jobs that pay living wages is also good. So the question is fair: Mr Gillaspy should qualify his comment by noting what metrics he’s using to say that AZ & TX are ‘not prosperous places’.

  6. Anonymous Submitted by Anonymous on 02/11/2010 - 05:00 pm.

    Small correction: Arizona’s unemployment rate is 9.1%, not significantly lower than the national average of 9.7%. That’s the official rate; add in the immigrants and you have a much higher rate, according to local officials. The Phoenix economy is certainly in worse shape than the MSP economy, and the population growth has dramatically slowed down.

  7. Submitted by Jeremy Powers on 02/11/2010 - 05:20 pm.

    I’m not surprised people are leaving. It used to be we had a state that worked. Maybe the taxes were high, but the state worked together and people got something for their money. Today, Minnesota is essentially dysfunctional. It’s made worse by Governor-in-name-only Tim Pawlenty who runs around the country telling every Minnesota is a high-tax state and how awful it is. He spends ZERO time actually trying to do something for the state.

    I though Gov. Jesse Ventura was self serving. He looks like Mother Teresa compared to Pawlenty.

  8. Submitted by dan buechler on 02/11/2010 - 05:55 pm.

    #4 Texas has one of the highest rates of uninsured people in the nation. In Texas its good to die young, its a bitch to grow old.

  9. Submitted by dan buechler on 02/11/2010 - 06:42 pm.

    Once for work I traveled to Texas to get training for a mechanism we repaired. The plant tour guide proudly talked about her community and its largest employer and how they didn’t need a county hospital there, in fact they had no hospital at all. If you got sick you just traveled over 45 miles to the next county and got treated there. Whooee they don’t make them much dumber than some of the leaders there. 25% of the population has no health insurance at all. And we iz prosperous all long as we is yung ones.

  10. Submitted by Joel Jensen on 02/11/2010 - 07:30 pm.

    No beef with the Lone Star State and not sure what measurement was used to characterize Florida, Arizona and Texas as “not prosperous”, but while they are rarely at the bottom of state lists, compared to Minnesota, they do sometimes look a little peaked:

    Percent of people in poverty:

    US: 13.3
    MN: 9.5
    AZ: 14.2
    FL: 12.1
    TX: 16.3

    http://www.infoplease.com/ipa/A0104529.html
    (Different numbers with similar result here: http://www.statemaster.com/graph/eco_per_bel_pov_lev-economy-percent-below-poverty-level)

    Per Capita Income

    US: $36,714
    MN: $38,859
    AZ: $31,936
    FL: $36,720
    TX: $35,166

    http://www.infoplease.com/ipa/A0104652.html

    Percent Uninsured (Health Insurance) (2007-2008)

    US: 15.4%
    MN: 8.5%
    AZ: 18.9%
    FL: 20.2%
    TX: 25.2%

    http://www.statehealthfacts.org/comparetable.jsp?ind=125&cat=3

    And although we may pay a bit more in taxes, you get what you pay for.

    Best States to Live

    # 2 Minnesota: 33.86
    # 36 Arizona: 22.11
    # 37 Florida: 21.82
    # 45 Texas: 19.93

    http://www.statemaster.com/graph/lif_bes_sta_to_liv-lifestyle-best-states-to-live

  11. Submitted by Jon Graves on 02/13/2010 - 06:02 pm.

    If we are doing so well in population compared to others why are we looking at the potential loss of a congressional seat. There is no doubt there is a newer population basis for the two largest cities, so we had to sustain a loss someplace else. Tax revenues will be a struggle wealth tis transferring out of state.

    20 years ago the arguement was businees is not moving??? Cargill, 3-M, Target based here, but have grown a great deal more. Ask them why they open new in other areas, you bet they monitor the bottom line that is free enterprise and given choices they have selected. Minnesota could not even get Target to build their regional warehouse in Mankato. They took Cedar Falls, IA.? When your three largest employers in 1992 were the Universtiy of MN, State and Federal government take a guess how much you could have had here if the environment was equal. In 1979 Mr. Yonts was transferred here from Indiana. He left three years later, saying Minnesota had a love of itself, but the quality of life being better?, he would not buy. He said we were paying more for getting less, we should go give it a try to find out.

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