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- PA Revenue Strong Midway Through Year; Tax Cut Could Have Big Impact
- What to Make of the Fiscal Cliff Deal?
Tax Flight Is a Myth, Report Finds
Submitted by Thirdandstate.org on Fri, 08/05/2011 - 11:08am.
A blog post from Christopher Lilienthal, originally published on Third and State.
We’ve heard it before. If you increase state taxes, people will up and leave for lower tax states — especially the most affluent residents. You often hear the same argument used to support tax cuts.
A compelling new report from the Center on Budget and Policy Priorities busts this common myth advanced by those who oppose a balanced approach to budgeting and tax policy. Turns out Americans move from state to state for a variety of reasons, but tax levels rarely factor in.
Not surprisingly, cheaper housing and job opportunities are much more likely to drive people to move to another state than tax levels.
As the report finds, the effects of tax increases on migration are, at most, small — so small that states raising income taxes on the most affluent households can be assured of a substantial net gain in revenue.
The report cites numerous examples of research debunking the migration myth and, through case studies, shows how misinformation about the impact of taxes on migration can influence policymakers and the media. Those who support the migration myth often wrongly assume a cause-and-effect relationship, promote irrelevant findings, and inaccurately measure migration, the report found.
On the flip side, low taxes can prevent states from maintaining the kinds of public services that create jobs and build a strong economy — the very things that potential residents value.
As we’ve long said, it’s more important than ever that we invest in Pennsylvania's future, and that’s why it’s so dangerous to rely on flawed information about the effect of taxes on residents’ decisions about where to live. Failing to raise the resources we need to maintain strong schools and universities, safe communities, and quality roads and bridges will hurt us both now and in the long run.
Well...
We have the cheap housing. It's hard to argue that there isn't any cheap housing in Philadelphia. Many of us who live here like that quality enough that it's our primary motivation for living here.
And as shown by PennPraxis... we have dirt cheap property taxes to go with that. The City makes up for it in the Wage Tax to even things out.
The other half of your cited report: job opportunities... well, that's where the problem is, isn't it.
And job opportunities do not happen in cities with very few well-functioning schools with local economic configurations not compatible with macroeconomic trends (Philly was at the forefront... in the 1920s., and never adjusted when the winds changed direction), don't plan well for the future, and maintain a governing structure that's in an antiquated state of disarray that makes conducting businesses in the city frustrating at best.
You can still have high taxes and be streamlined and efficient. Taxes are just rates that are applied to things and events. Making the burden of going about your business a headache, and with opportunities just as good not physically far from Philadelphia's borders, leaves us out in the cold.
Because opportunity has expanded outside Philadelphia, that's created more housing outside Philadelphia, and that's why more people live and work outside Philadelphia than live in it. The trend is pretty abrupt, too. In 1970 the majority of the white collar workforce used to work in Center City. Now Center City holds a fraction of our region's office space.
I'm surprised frankly at how little hardcore I/T industry there is in a Top 5 American city. There's some software shops located within Philadelphia, but what Philadelphia has pales in comparison to what's in Blue Bell, Horsham, Chesterbrook, Radnor, Newtown Square, etc. etc.
slight clarification
Interesting article. Of course job creation is our city's biggest problem; our crazy business privilege tax - not its size but its structure, falling disproportionately on local business - is certainly a factor in keeping job creation on our side of City Line Ave low. @EastChestnut is right to note Philly's relatively affordable housing stock (for middle-class job seekers, that is) and our city's relatively low (though wildly inequitable) property tax burden. But I would make one small clarification about our commercial real estate market, learned after nearly a decade organizing janitors: Center City and the suburbs have about the same amount of office space, roughly 50 million SF; the burbs charges more or less the same rents per sq ft at Center City, janitors get paid less in the burbs as well bc they've only had a union since 2006. But it's important to note that suburban office parks face a far higher vacancy rate than Center City's prime rel estate right now.