June, 2015

State Fiscal Condition and Interstate Income Migration

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This analysis compares income migration to two measures of state fiscal condition with a statelevel data set. This analysis focuses particularly on tax- and expense-burden differences (measurements of fiscal condition) between pairs of states. These data have almost 7,000 pairs of states that serve as observations. Each observation (pair) has an origin state that lost income and a destination state that received income from 2002 to 2010. This analysis finds that destination states with lower expense burdens (defined as total government spending per capita) and tax burdens (defined as total taxes levied per capita) relative to origin states consistently elicited more income migration than destination states with higher expense and tax burdens. This is so even when differences in factors like crime, weather, population, per capita income, demographics (race and age), unemployment, the proportion of a state’s industry devoted to natural resources, and tax code progressivity are controlled for. This analysis suggests state policymakers have control over at least one factor that affects migration patterns: the burden of government spending placed on taxpayers relative to other states.