Another Swing And A Miss In Fox's Quest For Lower Taxes


Fox's Neil Cavuto hosted serial misinformer Art Laffer to make dubious claims in support of lower tax rates. The segment was based on the premise that productive citizens leave high-tax states for low-tax ones. This premise was also pushed by a New York Post article, which used the Tax Foundation's state-to-state migration data, a tool which details how many people and how much income have moved to and from a specific state.

But attributing tax rates as the primary motivating factor behind the movement of labor and capital out of a state is highly questionable, as a large body of evidence contradicts this claim. A report by the Center on Budget and Policy Priorities (CBPP) points to non-tax factors that are primarily responsible for spurring migration between states, such as new jobs, cheaper housing, or a better climate:

Most people have strong ties to their current state, such as job, home, family, friends, and community. On average, just 1.7 percent of U.S. residents moved from one state to another per year between 2001 and 2010, and only about 30 percent of those born in the United States change their state of residence over the course of their entire lifetime. And when people do relocate, a large body of scholarly evidence shows that they do so primarily for new jobs, cheaper housing, or a better climate. A person's age, education, marital status, and a host of other factors also affect decisions about moving

CBPP cited Florida as an example of a state that, despite having no income tax, has recently shed population:

CPBB reported:

Consider Florida, often claimed as a state that attracts households because of its low taxes (Florida has no income tax). In the latter half of the 2000s, the previously rapid influx of U.S. migrants into Florida slowed and then reversed -- Florida actually started losing population. The state enacted no tax policy change that can explain this reversal. What did change was housing prices. Previously, the state's lower housing prices had enabled Northeastern homeowners to increase their personal wealth by selling their pricey houses and purchasing a comparable or better home in Florida at a lower price. But housing prices in Florida rose sharply during the mid-2000s, narrowing opportunities for Northeasterners to "trade up" on their expensive homes.

Other studies have noted that increases in state taxes play a marginal role in migration. A Vermont tax commission attempted to determine if wealthy resident were fleeing the state due to the state's tax rate. The commission concluded that "conventional wisdom is not supported by the data" since Vermont tax filers on average earned 18 percent more than filers leaving Vermont for other states.

A Stanford study examined the implementation of a new progressive state income tax in New Jersey, and whether the millionaire tax would induce a tax flight among the wealthy. The report's findings concluded that those subject to the new tax "show much the same trends in migration patterns after enactment of the millionaire tax," and that the findings "mesh well with existing research that shows that the migration response to marginal tax policy changes is generally quite small."

This however didn't stop Cavuto and Laffer from attributing state tax rates as the driving impetus for migration from New York to Florida.

Indeed, Laffer expertly illustrated why superficially simplistic explanations are often wrong and deeply inadequate, saying: "You have two locations Neil, A and B. If you raise taxes in B and you lower them in A, producers and manufacturers and people are going to move from B to A, it's as simple as that. It's not rocket surgery, thank you."

This is the latest in a long line of misleading attempts by Fox to push for lower taxes.

Posted In
Economy, Taxes
Fox News Channel
Neil Cavuto, Art Laffer
Your World w/ Neil Cavuto
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