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