Study Suggests $1.2 Billion has Moved Out of State Since 2003
Wednesday, July 18, 2012
Rhode Island lost $1.2 billion in annual income thanks to taxpayers leaving the state between 2003 and 2010, according to a report released Tuesday by the Rhode Island Center for Freedom and Prosperity.
The report suggests that 24,455 more income-tax-paying households left Rhode Island for other states than moved in and as a percentage of population, the Ocean State lost more taxpayers than any other state in the country during that period.
Roughly 35 percent of the 110,207 Rhode Island's net out-migration occurs to the bordering counties of Connecticut and Massachusetts, which is not surprising given the state’s tax burden, according to the report. In the 2009 fiscal year, Rhode Island's state and local tax burden, as a percentage of private sector personal income, was 16.1 percent, compared with 14.5 percent in Connecticut and 12.9 percent in Massachusetts.
"The inescapable fact is that people are looking to avoid the high state and local tax burden in Rhode Island while being able to remain close to their families and careers," Stenhouse said.
The report suggests that the “out-migration” trend, should be concerning to cities and towns still working to overcome unfunded pension liabilities and ongoing budget crises. Research director Justin Katz said all five Rhode Island counties saw a net loss of population to bordering counties in other states; which cost the state over $250 million.
"What makes these results especially relevant is that taxes aren't the only motivation for leaving,” Katz said. “Cities, towns, and the state as a whole have to improve services like education, even as they ease the burden on the people who live here.”
Still, others say too much of a emphasis is place on the tax burden when it comes to comes to the reasons people leave Rhode Island. In April 2011, the Political Economy Research Institute (PERI) at the University of Massachusetts, issued a report stating that employment opportunities have the strongest influence on migration.
Like Katz, the PERI report said public services, such as “increasing higher-education enrollment, decreasing property crime, or improving housing affordability,” can help retain people.
“Evidence from surveys of migrating households, the existing economic literature, and new analysis in this paper all suggest that taxes do not play any notable role in causing people to leave Rhode Island,” the report stated. “The most important factors in influencing household migration are economic and family-related reasons. If anything, higher state income taxes decrease the numbers of people leaving a state. Taxes do appear to influence the choice of which state to live in once a person has decided to move, but the impact is modest. If Rhode Island uses the revenues from higher taxes to create jobs, reduce unemployment, and reduce property crime, the small negative impacts from taxes can be easily overcome.”
Kate Brewster, who heads up the Economic Progress Institute, also disputed the Center for Freedom and Prosperity’s findings.
“This report is another ill-fated attempt to use migration data to draw far-reaching conclusions in support of a tax policy agenda, in this case, eliminating the sales tax, the state’s second largest source of revenue. Such a move would be financially devastating to the state and its ability to deliver public services like education, health care and recreation.”
Dan McGowan can be reached at [email protected].