When states raise taxes, people move away. It’s a simple truth, but only recently have we been able to quantify this effect and see “how money walks,” thanks to a new book from Travis H. Brown.
Brown told Opportunity Lives that the idea for the How Money Walks book came from an interest in IRS data files by Rex and Dr. Jeanne Sinquefield, who are very involved in public life and policy advocacy. “Initially, we wanted to calculate how many taxpayers were leaving our home state of Missouri,” said Brown.
The project expanded quickly, and after downloading 100 million taxpayer records for 19 years, Brown and the entire How Money Walks team have learned shocking statistics about people’s responses to tax increases in all 50 states.
Today, you can go to the How Money Walks website and look at the data for your state. “No matter whether you love what the data explains, or detest the information about your state, we believe that it is important that the American people have this knowledge available from their Internal Revenue Service,” said Brown.
What makes the How Money Walks data so interesting is that it is not a survey, so people can’t lie about their preferences. The data is from actual IRS filings.
The website shows a color-coded map of states, from red to green. Red states lost billions of dollars of income as people moved to states with lower taxes, while green states were the beneficiaries of this migration. For example, California (which is red) lost $46.32 billion in annual adjusted gross income between 1992 and 2011. Texas, on the other hand, is green – because it gained $27.34 billion annually over the same period.
So why do so many people flee high-tax states? It’s economic common sense, said Brown. “Just like water seeks its own level, capital and income goes to where it is most welcome.”
If states want to keep attracting new residents and businesses, they need to streamline their tax policies to become more welcoming. “With relatively high state income and city earnings taxes in Manhattan, the only thing that you know for sure is where smart taxpayers will not stay – in the Big Apple,” said Brown.
The federal government is responsible for some unfairness in the whole approach to tax policy. Low-tax states are often penalized by federal tax rules, giving a disadvantage to people who rationally choose to live in these states.
Federal tax policy is also so complicated that it creates even more problems for Americans. “Beyond fairness issues within the states, federal tax reform can help raise the tide for all boats through tax simplification, fewer tax brackets, lower marginal rates, and a competitive corporate income tax policy,” said Brown.
Thousands of Americans have downloaded the How Money Walks mobile apps (for Apple or Android) to look up data on their specific state. The interface is clear and easy to use, and the mobile app makes it easier for people to spread the word about what they’re learning.
Brown is currently participating in a book tour to get the How Money Walks message out across the country. He is often on Fox and Friends as well as other national TV programs to speak about the research. And there is more to come, said Brown. “In the future, we are seeking to raise awareness of tax transparency through additional media broadcasts, documentary media, leveraging content partnerships with personal finance sources, and collaborations with leading think tanks or taxpayer coalitions.”