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Maine Beats New Hampshire in Head-to-Head Battle for Taxpayers and Their Income

May 9, 2012 by

Over the last few weeks, as part of a larger quest to deliver control of public goods and resources to private interests, Governor LePage and his allies have been calling for the elimination of Maine’s individual income tax. The argument is that Mainers are fleeing the state because of our income tax. If that were true, then we would expect Mainers to move to New Hampshire where the weather, demographics, and Yankee culture are comparable but there is no income tax.

The numbers tell a different story. From 1996-2010, Maine saw a net gain from New Hampshire of 1,787 tax families comprising $145 million in income according to IRS state-to-state migration data.  In addition, the average income of the tax families that moved from New Hampshire to Maine ($39,000$39,413) was higher than the average income of the tax families that moved from Maine to New Hampshire ($36,000$36,752).  Not only did Maine gain residents from New Hampshire, but the ones who moved here were better off on average than the ones who left.

It is true in a narrow sense that no-income tax states account for lost population in Maine. What’s glossed over is that only one state is overwhelmingly responsible for that loss. Florida, with its sandy beaches and mild winters, accounted for 90% of Maine’s net loss to no-income tax states from 1996-2010. Suggesting that the absence of an income tax is the reason for this migration is just plain wrong.  The next four states that have seen the largest influx of Mainers – North Carolina, Arizona, South Carolina, and Virginia – all have income taxes.  They also have mild climates, affordable housing, and other amenities that are particularly attractive to recent retirees.

There just isn’t much evidence out there to support the idea of tax flight. That’s because it’s a myth:

As we discussed in a major report last year, the vast majority of people live their whole lives in the state where they were born, and the main reasons people move from one state to another are job prospects, housing costs, family considerations, and climate. So, for instance, to draw any meaningful conclusions about our two newest states, you’d want to factor in that housing in Anchorage is a bargain compared to Honolulu.  Studies by economists and demographers that take into account the wide range of other factors show consistently that taxes have little if any impact on migration.

And it’s a myth that’s been debunked over, and over, and over.

Rather than build policies based on ideology, we should focus instead on the real reasons people move – jobs, affordable housing, family ties, climate, and quality of life. We should build on our existing assets and make the types of investments that will give Maine a competitive advantage in the areas that matter most to people.

5 Responses to “Maine Beats New Hampshire in Head-to-Head Battle for Taxpayers and Their Income”
  1. Tony says:

    Great blog post Joel, makes a lot of sense. Being recently retired my wife and I went to a warm climate this winter for a few weeks to try it out, but I wouldn’t move because of taxes or climate except for a few weeks a year. You just can’t beat Maine overall.

  2. Frank says:

    Of the 1787 net gain for Maine, 1700 were hired at the Portsmouth Naval Shipyard in Kittery Maine and still live in New Hampshire but pay Maine taxes. Maine taxes income derived in Maine.

  3. Joel Johnson says:

    Frank-

    I understand how Maine’s income tax is levied according to the location of employment, not residence.

    More importantly, I wish I knew where you were getting your numbers. When were the 1,700 hired? How do you know they live in New Hampshire? Can you point me to a source for this information? There are 4,700 civilians employed at the shipyard, so 1,700 is a big addition!

    Regardless, remember that the 1,787 cited in my post is the net over the 1996-2010 period. Regardless of any employment and residence changes at the shipyard (and I’d love to know more about it if you can point me in the right direction), my point remains the same: if the Maine tax flight narrative were true, we would expect to see it in New Hampshire first and foremost. But the data don’t support the story.

  4. Julie-ann says:

    My husband and I live in Portsmouth and work in New Hampshire, too. We were both born in Maine but went to colleges and settled in New Hampshire. We really love the Seacoast area, but are shopping for our first home and aren’t sure which is the better deal overall. The prices in Portsmouth are significantly higher than surrounding towns, including Eliot and the Berwicks, but close-by New Hampshire towns are much more affordable regarding initial purchase prices. Where can I find a calculator that will help me compare what our income tax and other Maine-specific tax expenses would be if we move back over the border versus the high NH property taxes? There are a lot of other factors to consider, of course, but your article has me thinking…

  5. Jared says:

    I am a recent graduate in a professional program expecting an annual income around 100,000. I grew up in Maine and graduated in Maine. I am looking/applying for jobs in both Maine and New Hampshire. The listings I find in New Hampshire are taking priority over Maine listings because of the lack of income tax. It’s that simple for me. In the end, factors like job availability may be the deciding factor, but this doesn’t change my preference for New Hampshire. How can such a pure example like this be considered myth?

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