Taxes Drive Relocations

For many years New Hampshire has had what has been come to be called “The Advantage.” This so-called advantage? No state income or sales tax. For just as many years there have been those in New Hampshire that see the lack of such broadbased taxes as a travesty, preventing all of the liberal social programs they love so much from coming to fruition. But the lack of those broadbased taxes has provided New Hampshire residents and businesses an advantage over other states in the Northeast, attracting new businesses and the jobs that go with them to the state.

As much as the “New Hampshire Advantage” has been slammed by the tax-and-spend socialists, now there's proof that states without an income tax are attracting jobs and residents, while states with an income tax are losing them.

An old adage says high taxes don't redistribute income, they redistribute people. For new evidence look no further than migration patterns within the United States, as documented in a new survey by the moving company United Van Lines.

The United Van Lines study finds that the biggest population loser last year was Michigan, where two families moved out of the state for every new family that moved in. Americans are also fleeing New York, New Jersey, Ohio, Pennsylvania and Illinois. Without interviewing the departed, it's impossible to know the reasons for this outward migration. No doubt overall economic prospects, climate, quality of life and housing prices play a role.

But one reason to conclude that taxes are also a motivator is because the eight states without an income tax are stealing talent from other states. They are Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, and each one gained in net domestic migrants. Each one except Florida -- which has sky-high property taxes on new homesteaders -- also ranked in the top 12 of destination states.

High taxes are driving out residents, who pick up and move to states with low taxes.

New Hampshire does have taxes, of course. Between business taxes (relatively low compared to most other states), property taxes (high in some towns, moderate or low in others), as well as what are called “bed and belly taxes” (meals and room tax), the state and municipalities do a pretty decent job of raising the revenues needed, for the most part. The fact that tax revenues are limited forces the legislature and the towns to keep spending in check. Or at least most of the time they do. The overall tax burden in New Hampshire is among the lowest in the nation. But as I mentioned before, there are folks working to change all that here in New Hampshire.

The broadbase tax proponents have been selling the idea that a sales or income tax will somehow ease the property tax burden on state residents. But history has shown over and over again that it doesn't work out that way. The residents end up with the same or higher property taxes as well as a sales or income tax. This means the state spends more, usually on things it doesn't really need, and the taxpayers now have even less control over spending at the state and local level. It's been a losing proposition every place it's been implemented. And once such a tax is imposed it is damn near impossible to do away with. The legislature will have a new flow of revenue and they won't likely give it up. At that point a major thing that attracted new residents and businesses to the state will be gone and people will look elsewhere to live. It's a lesson our neighbor to the south is learning the hard way.

Massachusetts, also known pejoratively as Taxachusetts, has seen their population shrink over the past 10 years as residents and businesses seek greener pastures. Some come here to New Hampshire. Others head to the South or the West. As taxes in the “Pay State” continue to rise, so will the outflow of jobs and residents. The only question is whether the governor and legislature of Massachusetts will do something about it before it comes to resemble Michigan in regards to joblessness, plant closings, and business relocations. (The same thing happened there back in the 1970's, with businesses closing due to a deep recession or relocating to escape the increasingly onerous tax burden, and a general outflow of people to follow the jobs because there were none to be had in Massachusetts.)

Is the tax system in New Hampshire perfect? Not by any means. But it is a far sight better than most of the others, attempting to keep control of the state spending by keeping the legislature and state agencies lean.