Little evidence seen of U.S. interstate 'tax migration' threat

Fri Feb 1, 2013 2:02pm EST
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* Tax cutters argue high taxes drive people out of state

* Studies find little support for idea of tax migration

By Nanette Byrnes

Feb 1 (Reuters) - Millionaire golfer Phil Mickelson's recent musings on leaving California to avoid its high taxes seemed to support the idea, popular in some state capitals nowadays, that Americans will flee high-tax states for low-tax ones.

The threat of 'tax migration' is part of debates swirling in some states that are considering big changes to their tax codes. But studies show that interstate tax refugees, or potential ones such as Mickelson, are few and far between.

"It is very difficult to see a migration response when you look at the people affected by the taxes," said Cristobal Young, an assistant professor of sociology at Stanford University, who has studied tax increases in California and New Jersey.

Not even the super-rich exit in large numbers after taxes go up in their states, according to a growing body of research that shows relocation decisions involve many factors beyond taxes.

Some politicians are not so sure though. Tax-cut advocates in Kansas, Nebraska, Missouri, Oklahoma and Louisiana have voiced concern that their states are not competitive with nearby no-tax states, such as Texas and Florida, and that the imbalance chases away citizens and jobs.

A test is coming in Kansas City, which straddles two states: Kansas, which cut its top income tax rate to 4.9 percent from 6.45 percent on Jan. 1, and Missouri, where the top rate remains 6 percent.   Continued...