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State Tax Policy Not Driving Migration; Jobs, Family, Weather Matter More

Mr. Tsitrian directs our attention to the latest refutation of the South Dakota GOP's fantasy that their low-tax policies attract residents and businesses. The Center on Budget and Policy Priorities grinds through all sorts of data to tell us South Dakota's lack of an income tax and other purportedly pro-business tax policies won't reliably boost our economy through migration:

  • Interstate migration has declined over the last three decades, from a peak of 3.2% of Americans moving across state lines in 1990 to just 1.5% moving interstate in 2013.
  • Among that small fraction of Americans changing states, jobs, family, and weather swamp tax policy in driving migration.
  • From 1993 to 2011, South Dakota experienced net out-migration of 2.5%, about 5,000 households.
  • The average gross income of folks moving out of South Dakota was about $5,000 less than folks who moved in and $12,000 less than folks who stayed. The average income of the movers out is just about the same as the average wage for South Dakota teachers. Hmmm...

Whatever is making people move to South Dakota, it's probably not tax policy.

23 Comments

  1. John Tsitrian 2014.05.12

    Also, Cory, as I note in the piece, CBPP's sources are the IRS and the U.S. Census Bureau. As I'm the last guy that would push for the politically impossible imposition of personal and corporate income taxes in SD, I do think the study shows that our tendency to do some "laurel-resting" on our income tax-free status hasn't yielded much in the way of economic development or workforce shortage issues.

  2. Troy 2014.05.12

    Directly, I agree. Few people say "I want to move to South Dakota to pay less taxes." Most move because they have a job opportunity that factors in a decision that says "this is better over-all than my current options."

    But, indirectly, South Dakota's tax structure is critical. The booming health of our economy is what answers their direct requirement: Job opportunity.

    Liberals often say "lower taxes don't matter" but they say "if we tax/fine certain behavior, we will diminish/eliminate its occurrence. Simple economics is if you tax something you get less of it than if you don't tax it. Period.

    Because we have a low tax rate, companies have competitive advantage which causes them to be more successful and grow more which creates the job opportunity for which they are coming to South Dakota.

    And, the fact we have bitter cold winters, to attract someone, we have to overcome that with good jobs.

  3. John Tsitrian 2014.05.12

    Troy, the CBPP study compares economic growth rates between the nine states that have no income tax and the nine states with the highest income taxes and finds that annually, "from 2002-2011 the (inflation-adjusted) per-capita economic output of the nine states without a personal income tax grew an average of 5.2 percent while per-capita output grew 8.2 percent in the nine states with the highest income taxes." From this you'd have to conclude that a no-income-tax structure isn't necessarily the basis for strong economic growth.

  4. larry kurtz 2014.05.12

    End Social Security and watch old, white people flee to warmer climates.

  5. larry kurtz 2014.05.12

    American apartheid drives white retirees to South Dakota: nothing more, nothing less.

  6. Nick Nemec 2014.05.12

    The key to recruiting people into SD is to increase wages. If businesses that are having a hard time finding employees increase the wages they are willing to pay for those positions to at least the national median wage for similar type work workers will beat a path to SD for those higher wages.

    It (higher wages) would be much more effective than any government grants, incentives or recruitment programs that might be implemented to find employees. Workers will tend to look out for their own best interest.

  7. larry kurtz 2014.05.12

    Nursing assistants, waitresses, checkers at Sprawl-mart, great careers!

  8. larry kurtz 2014.05.12

    South Dakotans don't want people seeking careers, they want servants.

  9. Doreen Allison Creed 2014.05.12

    As the mother of three, and as someone who has dedicated a great deal of personal time in economic development endeavors, I'm sad to say only one of my offspring works in South Dakota and soon she will be moving out-of-state. She can work here because she's an RN, however, her husband-to-be, is a South Dakotan with a chemical engineering degree. Jobs in his field in South Dakota are scarce.

    My son, loves tax-friendly SD, however, his field of study is almost non-existent in our state. He's just moved from high-tax Minneapolis to D.C. to accomplish his goals. He didn't consider taxation in his decision making - it was the career opportunity. Likewise, his bride-to-be will soon be transferring. S.D. has no jobs in her field. Hopefully, my other daughter one day will be move back to S.D. In the meantime, she's chosen to work in cities located in states that have income tax. She wanted the opportunity to learn specialized occupational therapy techniques.

    My children, and their future mates, would love to live in South Dakota, but the opportunities are not here. Their situation is not unusual. College graduates move for the jobs but question having to raise future children in metro environments.

    Those of us, who have worked to increase the job opportunities, know the state's strengths and shortcomings.

    Lack of an extensive interstate highway system, lack of extensive rail transportation; an insufficient air travel network, an adequate population base, lack of sufficient tradesmen, and even our low unemployment - all contribute to making it more difficult to attract businesses.

    Some may wonder about low unemployment can hamper development, but executives worry they will be able to find enough employees. An international company last month, pulled out of the Bakken because they could not find enough employees.

    There are so many variables that influence attracting companies to South Dakota. Most prospective businesses are coming from metro areas: The decision-makers like the low crime rate and friendly atmosphere but parents also want schools that offer a broad curriculum. They expect a wide variety of retail and housing selections. I live in the Black Hills, they love the scenery, but question why some people are not good stewards of their property.

    I have been at business scouting expos. I can attest that South Dakota's tax climate is very attractive. Advertising this fact, catches the eye of those looking to relocate or expand their businesses. It is one of the advantages the state can offer, but some of the other needs I cited need to be addressed. But some "wants" are outside any one's ability to change. We can't make airlines fly. We can't build a north-south interstate on the western side of the state. We can't build an east-west interstate in the northern part of the state. We've seen how dedicated the rail companies are in fixing its limited state system. Currently, there are but two cities capable of fulfilling most of the wide array of businesses wants.

    Does this mean we throw in the towel and call it quits. No way. But those of us in smaller towns need to realize we need to concentrate on attracting smaller businesses and help develop "home-grown" enterprises. And hopefully, little by little, there will be more businesses that can accommodate more employment opportunities within our borders. It's very sad to see our children having to leave. It seems like those not having to say "goodbye" have their own family businesses - be it in town or on a ranch or farm.

  10. Stan Gibilisco 2014.05.12

    Eight-month winters don't exactly enchant people.

  11. Stan Gibilisco 2014.05.12

    Let's impose a 7percent personal income tax straightaway and then watch folks rush in.

  12. Deb Geelsdottir 2014.05.12

    Ms. Creed makes excellent points.

    About the highways: Wasn't the idea behind 4 lane Hwy 12 east of Aberdeen and hwy 79 south to Hot Springs a sort of mini- freeway plan? If hwy 85 north of Belle Fourche to ND was similarly expanded, we'd have a West River freeway. If hwy 12 was 4 lane to Mobridge, and hwy 20 from Mobridge to Montana, that would take care of the northern freeway.

    If the Republicans would loosen up purse strings, that would be a major improvement in SD transportation. Then there are hwys 281 and 83 for central SD verticals. Hwy 212 for a central horizontal?

    Anyway, there are some things SD can do, as Ms. Creed said. The Republican power structure needs to find the will and compassion for their sister and brother SDans. Right now SD's average citizens are receiving as much concern as the citizens of a banana republic.

  13. Deb Geelsdottir 2014.05.12

    Oh yeah, the "low taxes will bring people flocking to SD" pitch has been in effect for at least 4 decades now. If it was going to work, it would have by now. 40 years is plenty of solid evidence ofn how ineffective that policy/scam is.

  14. rollin potter 2014.05.12

    with all you people and your good ideas why did you not put that effort into running tsitrian and nemec for governor and Lt. governor??????

  15. Douglas Wiken 2014.05.12

    I think the value of 4-lane highways for relatively limited traffic makes little sense. From what little I can tell, corporations make 4-lane highways a necessity in their plans even when they are not needed. The 45 miles from Winner to I-90 usually has such limited traffic that a driver often meets only 3 or 4 vehicles...usually semi-trailers hauling grain or cattle and might be passed by only one speeder. We have driven that stretch of highway and met only one vehicle-- a SD Highway Patrol car.

    The problem is not necessarily the highways, but the arbitrary irrational decisions made by corporations. Those guys getting $20 million a year have to make it appear as if the actually do something.

  16. John 2014.05.12

    John & Troy, SD should immediately fire its B-school professors who have "tenure" yet lack the moral turpitude to scientifically, loudly report the backward, regressive, unproductive (negative ROI) of the state tax and economic development policies. Aside from cranking out Troy's politically correct thinking B-school grads - it's hard to argue that SD's B-schools provide any second public purpose.

  17. Michael B 2014.05.12

    Do you think that simply by increasing taxes and state spending that you will raise wages and create jobs?

    I think you might in for bit of a surprise. Things are not so easy.

    If we are serious about making changes, let's start with the toughest problem first: unemployment on the reservations.

  18. Stan Gibilisco 2014.05.12

    Confession: lack of income tax drew me here.

    Concern: Black Hills Power might drive me out.

  19. Stan Gibilisco 2014.05.12

    Internet with Midcontinent here in Lead ... Up to 75 Mbps down at best times. Consistent 20 Mbps up. Decent. A definite keeper.

  20. caheidelberger Post author | 2014.05.13

    Of course not, Michael. I am primarily disputing the claim the SDGOP makes, that low taxes and low state investment in public goods boosts our economy. I will go so far as to say that increasing taxes does not mean our economy will flounder. Increasing taxes would allow us to make more investment in necessary public goods and in morally defensibly wages for teachers.

    Stan, I would definitely move for that download speed.

  21. caheidelberger Post author | 2014.05.13

    Doreen makes a good point. Troy may say our tax structure is critical, but our tax structure is not filling the gaps Doreen identifies in our public goods and job opportunities. The "booming health" of our economy is not creating the job opportunities we need.

Comments are closed.