Voting with their feet

Date posted: June 9, 2014

There’s a theory in economics that says if residents are unhappy with their local taxes, they will be more likely to move. Host Mary Walden asks her husband, NC State economist Mike Walden, “Is there any evidence supporting this idea?”

Mike Walden: “And we had a debate about this last year in the North Carolina General Assembly. It was an element in the discussion about tax reform, and those wanting to lower tax rates argue this would help economic growth in North Carolina by attracting households to the state. There’s a big problem in trying to ascertain whether, in fact, people do look at tax rates when they move, because there are so many factors that come into play. The studies that had been done, and there was recently a big study using Treasury Department analysis showed that, yes, taxes do come into play, but they’re down on the list. Obviously the location of a job, location of family, the attractiveness of the state in terms of weather and other things, those indicators seem to be much higher. The research that’s been done does suggest though that everything else being equal, states that have lower tax rates do attract new households. If we apply those results to the changes that North Carolina made last year to the tax code, we would argue that, yes, those reductions in tax rates will attract some households to North Carolina, but in terms of numbers it’ll probably be in the low thousands.”

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