1.7.17

SHIPPING THE HUMAN CAPITAL OUT?

At the margin, taxes might affect the mix of migrants into or out of a state.
People move for a variety of reasons: jobs, family, weather, quality of life, schools, housing costs and taxes. Although academic studies differ on the level of importance, every study finds that taxes are one reason that people move. Sometimes, taxes are found to be the significant reason for migration to another state. Taxes have been found to affect even the location of star university scientists.

Some of the potential reasons for the growing out-migration can be eliminated. Many things haven’t changed in Wisconsin. The winters are still cold. Family and in-laws are the same as ever. The quality of life is good in every national survey. Housing costs are below the national average.

During the 1990s, Wisconsin gained residents in state-to-state migration. However, in the past 20 years, Wisconsin went from attracting people from other states to exporting people to other states.
At the margin, higher marginal tax rates on higher incomes might matter.
Wisconsin taxes today are relatively higher for upper-income individuals and on all investment gains. Those tax increases took effect during the Doyle administration and have not been reversed. Other states have cut taxes across the board. Wisconsin has not focused on individual tax cuts but rather on business tax cuts.

The specific driver on out-migration is the tax burden for middle- and upper-income families in Wisconsin.
Lower business taxes might bring in more businesses, but perhaps with a major financial and high-technology central place in Chicago, it is no accident that lots of state university graduates from other Great Lakes States migrate to Chicago, while support services, such as office supply warehouses and dollar store logistics, take advantage of the tax breaks.
Wisconsin attracted individuals from other states with lower levels of education — a net inflow of over 2,700 low-income individuals per year from 2008 to 2012. In that same period, Wisconsin lost 14,000 college graduates each year — the much discussed “brain drain” from the Badger state.
The efforts by Illinois politicos -- primarily Chicago Democrats -- to impose additional taxes on everything from carbonated drinks to the privilege of doing business -- I am not making that up -- might drive some of the financial services and technology businesses out of Chicagoland.  But are there enough loft developments and other amenities to make a Milwaukee, or a Madison, a logical place for setting up a trading floor?

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