If you run a high-tax, budget-busting state, the embarrassing
government statistics you fear the most are probably the migratory
data numbers put out by the Internal Revenue Service and U.S.
Census Bureau.
The figures show the number of people moving into and out of
every county and state in the nation, along with their income
levels. It’s an invaluable guide to how people vote with their
feet. It won’t surprise you to learn they tend to flee high-tax
states such as California and Illinois for low-tax states such as
Texas and Florida.
No one knows who was behind it, but the IRS suddenly decided in
December to end the data program after 21 years. “We were just told
this morning that the program is indeed going to be discontinued,”
an IRS economist said in an e-mail obtained by the Daily
Caller. “It is not our decision at all, and we are very
disappointed.”
After some criticism, the IRS at first admitted the program was
being “discontinued.”
IRS officials told the Washington Examiner that
scholars and citizens could instead rely on the Census Bureau’s
geographical mobility data, which is derived from two surveys of
the population. But as the Examiner noted, surveys are not
hard data: “It would be as if the federal government cancelled
elections and the counting of actual votes and told us to use
opinion polls to pick our leaders instead.”
California’s bureaucratic-industrial complex was no doubt
pleased. Following the November passage of a tax increase by
voters, Californians will now be paying the nation’s highest
marginal tax rates. The top state income tax rate is now 13.3
percent. If the Bush tax cuts are not extended, the effective
marginal tax rate on a high-income Californian will be nearly 52
percent, according to one study. Such a tax burden would be even
higher than New York City’s.
California’s progressive income tax system has long been
criticized for being overly dependent on a small sliver of the
population, fewer than 200,000 high-income earners, whose salaries,
capital gains, and dividend income keep the state afloat. Golfer
Tiger Woods left California for income tax–free Florida years ago,
and inventor Gilbert Hyatt has packed up for Nevada to avoid taxes
on his royalties.
What the IRS migratory data program did was put statistical meat
on those anecdotal bones. The Manhattan Institute released a report
last year entitled “The Great California Exodus” that used the IRS
data to show just how many people of all income levels are fleeing
the Golden State.
The report found that since 1990, California has lost nearly 3.4
million residents to other states. (The top 10 destinations were
Texas, Nevada, Arizona, Oregon, Washington, Colorado, Idaho, Utah,
Georgia, and South Carolina.) Over the last decade, an average of
225,000 residents left the state each year.
The Manhattan Institute concluded: “States that have gained the
most at California’s expense are rated as having better business
climates. The data suggest that many cost drivers—taxes,
regulations, the high price of housing and commercial real estate,
costly electricity, union power and high labor costs—are prompting
businesses to locate outside California, thus helping to drive the
exodus.”
Nor is California the only state exporting productive citizens
and businesses. Last May, the New York Post headlined a
story, “Outgoing income: Millions flee New York’s tax burden$.” The
article, which relied heavily on the IRS numbers, began “New York
state tops the nation in one key export—people fleeing high
taxes.”
Other jurisdictions aren’t far behind. Change Maryland, a
free-market think tank, used the IRS data to discover that 11,455
Marylanders changed their places of residence to lower-cost
Virginia between 2007 and 2010 after Democratic governor Martin
O’Malley dramatically hiked income taxes. The loss of tax revenue
to Maryland totaled $390 million. In total, more than 31,000
Maryland residents took a hike and shifted their tax filing status
in those three years. But Jim Pettit of Change Maryland said it
would be impossible to continue tracking those figures without the
IRS data. It sure sounded as if some liberal state officeholders
might have leaned on the Obama administration to spare them some
“inconvenient facts” about the consequences of their policies.
BUT THIS STORY has a happy ending. After much criticism that it
was “airbrushing” data out of existence, the IRS apparently
reversed course. Officials, in a classic case of bureaucratic
gobbledygook, claimed the migration data program wasn’t really
ending: “To improve data quality, the methodology for collecting
and tabulating the population migration data was recently
changed.”
Policies affect human behavior. As economist Arthur Laffer
observes: “You have two locations, A and B. If you raise taxes in B
and you lower them in A, producers and manufacturers and people are
going to move from B to A.”
