Study: People do not leave Rhode Island because of the taxes

ACCORDING TO research by University of Massachusetts Amherst, taxes do not play a notable role in causing people to leave Rhode Island.
Posted 4/13/11

PROVIDENCE – “Taxes do not play any notable role in causing people to leave Rhode Island,” said Jeffrey Thompson, assistant research professor at the University of Massachusetts Amherst’s Political Economy Research Institute.

Thompson said that the main factors influencing household migration are economic and family-related reasons. The results were published in study called “The Impact of Taxes on Migration in New England.”

“As New England states continue to struggle with serious budget shortfalls, policymakers face pressure to replenish the offers. Opponents raise the specter of families fleeing for lower-tax states. But new research finds the impact of taxes on cross-state migration is very weak,” he said.

Nevertheless, the brief finds that residents leave Rhode Island for other states at a slightly higher rate than the national average and the in-migration rate is slightly lower.

The brief also looked at the impact of some variables which affect migrations to and from Rhode Island.

  • When the unemployment rate increases by 0.9 percentage point, 1,590 more people leave and 4,089 fewer people arrive.

  • When the average marginal income tax rate on wage earnings increases by 2.3 percentage points, 752 fewer people leave and 1,410 fewer people arrive.

  • When own-source revenue as a share of the gross domestic product increases by 1.7 percent, there is no statistically significant impact on out-migration and 1,645 fewer people arrive.

  • When the housing affordability index increases by 5.2 percentage points, 987 fewer people leave and 1,222 more people arrive.

    Tax increases nearly always increase revenue, which can be spent in ways to make an area more attractive to current and potential residents, the study noted.

    For example, if Rhode Island were to raise the average marginal tax rate by 1 percentage point, it would generate about $170 million in revenue that could be used to hire 2,900 workers, which would reduce unemployment.

    “Even if half of the new jobs were filled with unemployed Rhode Island residents, out-migration from the state would fall by almost 700 and more than 1,700 new in-migrants would choose Rhode Island – far more than compensating for the smaller number of migrants who chose other states.”

    When looking at New England as a whole, the study finds that regional residents tend to stay put more than people in the rest of the country.

    In five of the six New England states, except for Vermont, the relationship between net migration and relative income is positive: more people enter and/or fewer people leave the state as relative taxes rise.

    “The opposite of what you would expect if people were fleeing taxes,” said Thompson.

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