* Constant state tax hike proponent Ralph Martire…
The problem is anti-tax zealots continually bombard the media with red herrings designed to sway public opinion against supporting the tax increases which the evidence indicates Illinois sorely needs. One of the most common canards is the ever-popular claim that higher tax rates kill jobs and the economy. Great rhetoric, that. It just doesn’t survive scrutiny. Consider that major, peer-reviewed studies by the Small Business Association, Congressional Budget Office, University of Missouri and the right-leaning CATO Institute and Kaufman Foundation for Entrepreneurship all found no statistically meaningful correlation between tax policy on the one hand and job/economic growth on the other. More recently, Kansas cut taxes and saw its economy nosedive, while California and Minnesota increased taxes and saw strong economic growth.
Then there’s the increasingly popular claim — also false — that the temporary tax increases of 2011 prompted Illinoisans to flee — running off to “business friendly” states like Indiana. After reviewing the data, however, a recent report by KDM Consulting found these claims simply didn’t hold water. Indeed, net out-migration is nothing new in Illinois — occurring every year but one since 1925, while Illinois’ net out-migration rate actually fell in 2011, the first year of the temporary tax increase.
Yes, more people move from Illinois to Indiana than the other way around, because Illinois has more people than Indiana. However, a greater proportion of Indiana’s population moves to Illinois than vice versa. Same holds true for Gov. Scott Walker’s Wisconsin, by the way. Which means the contention that Illinois’ temporary tax increases caused people to leave in droves is just so much malarkey.
* From that KDM Consulting study’s executive summary…
* Illinois’ out-migration is nothing new. The state has seen net out-migration every year but one since 1925.
* Illinois’ out-migration is overstated if international migration is ignored. Otherwise migrants from other countries are not counted when they move to Illinois, but are counted when they move out of Illinois to other parts of the country. Including international migration reduces net migration out of Illinois by one-third.
* Both in-migration and out-migration are tied to the economic cycle. People move when times are good and sit tight when they are bad. The 2011 income tax rate increases came as Illinois was moving out of recession, and migration could have been expected to increase.
* Illinois’ migration pattern is similar to those of its neighboring states. Illinoisans tend to move to the same states as do residents of Indiana and Wisconsin.
* Many migrants don’t move far. Illinois’ largest out-migration is to Indiana. Indiana’s and Wisconsin’s largest out-migration is to Illinois.
* Illinois is a large state so out-migration in absolute numbers is large. However, a larger percentage of both Indiana’s and Wisconsin’s population moves to Illinois than vice versa.
* Out-migration from Illinois to Indiana and Wisconsin has declined.
* Illinois net out-migration rates fell in 2011, the first year of the income tax rate increase, but increased significantly in 2014.
The full study is here.
*** UPDATE *** From the Cato Institute…
Just to set the record straight, Ralph Martire certainly doesn’t capture the views of Cato Institute scholars in his commentary on tax policy.
Many factors determine a state’s economic vitality, to be sure, so it would be foolish to claim that taxes are the only thing that matters. However, it would be equally foolish to claim that taxes don’t matter. There is a wealth of academic literature showing, on the margin, that higher tax burdens and higher tax rates lead to less income growth, less job growth, and reduced competitiveness at the state level.