August 6, 2014

Tax Migration?

A few maps have made the rounds lately. Most of them come from this pagethat page, or another page. All of them show something that gets a little feather ruffling but not a great deal of attention outside a very small circle of people. I refer to "income migration". Basically, it's a hobby for some people to point out how horribly some states are losing "wealth" and how wonderfully other states are gaining "wealth". To a point, they have a point. But I think they may overstate their point and potentially be looking in the wrong direction.

Fortunately, all the maps I pointed out (and many others) come from Tax Foundation, and whatever agenda may drive them, they are pretty good about citing their sources. In this case, their source was the IRS's "SOI Tax Stats--Migration Data". With that in hand, I decided to look at what they said. I took the data for 2011 (the most recent year currently available). A little computer wizardry, and I had my own little map, to wit:

Net Change in Aggregate Gross Income due to Migration, 2011
(Hold mouse over state to pop up a window with state total in millions of dollars.)

States colored blue through purple have improving levels of "net gain" in taxed income due to migration into a state from other states and foreign countries. Orange through red is worsening levels of "net loss" in taxed income due to migration out of a state to other states and foreign countries. It pretty much looks like most of the maps that are circulated, especially by people and groups with an axe to grind. It's easy to look at this map and say "California, New York, and Illinois are doomed." But if they're that severely doomed, why haven't they already completely collapsed? If all the money is running away from them, why isn't it all Mad Max there? Things might be unpleasant, but they're not Somalia levels of collapse.

This is where it becomes important to consider how large the states in question are, not in territory, but in people. Why in people? Let's compare the first map to a different map, side-by-side (with popup information if you hold your mouse over a state):

Aggregate Gross Income (AGI) Returns Filed

The map on the right is the net gain or loss in returns filed in 2011--essentially the migration of households into or out of a state. More detail on this in the next post.

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