Why did the taxpayer cross the road? – Twin towns


The questions of why some jurisdictions, whether cities, counties, states, or nations, increase in population and economic activity, while others decrease, are important in social and political terms. True for the economy too. A few weeks ago, I wrote about how COVID, technology, housing costs, and relative birth and death rates affect the demographics of different geographies.

Edward Lotterman

But what about relative tax rates and the distribution of public goods and facilities? Here, the stakes are much larger than the number of taxpayers and what they pay.

Review: A recent Census Bureau report listed changes from 2021 population estimates. Some states and major coastal cities, including California and metro Los Angeles, lost population. Lower-cost Sunbelt regions of Texas, including Dallas, Arizona, and Florida, have expanded. In Minnesota, the urban counties of Hennepin and Ramsey fell in population, as did Albert Lea and Fairmont, while Brainerd and Grand Rapids were among the winners. But very rural counties continue to erode.

Why migrate? Social mores on the number of children? Fleeing the weather and crime? Quality of schools and distance from opera or professional sport? Job availability and wage rate relative to cost of living? The weight of state or local taxes, particularly in relation to the public services received?

All of these factors play a role, but determining the importance of such myriad and complex factors is not easy. One should not jump to conclusions too quickly, but neither should any factor be ignored due to ideological predispositions.

Remember that the populations of given regions depend on two factors: What are births versus deaths? What is immigration in relation to the number of departures? Cause and effect then become very subjective.

Demographic factors can work in tandem for or against each other: in 1890, in virtually every Minnesota county and nearly every state, births exceeded deaths and immigration exceeded emigration. During my youth in rural southwestern Minnesota in the 1950s and 1960s, births continued to exceed deaths, but many high school graduates moved on. The population of my hometown of Chandler peaked at 388 in 1960. It is now less than 250, about where it was when my grandparents bought a farm in 1910. Slayton, the county seat of Murray, also peaked in 1960 but – unlike Chandler – now is more than double that in 1910.

Urban Ramsey County has grown decade-on-decade through the 2020 census, but is estimated to drop 1.5% by next year. The population of St. Paul itself has fluctuated, peaking in 1960, dropping a lot, then recovering almost to its peak and half as large over the last century.

Minnesota has more people than ever, 2.4 times more than a century ago. Compared to the same period, Arizona has grown rapidly and is 21 times larger, Florida 22 times larger, Texas 6.3 and California 11.5 as of 2020. But it is estimated that Florida and Texas increased in 2021 while California suffered a slight loss.

What gives in all this?

For rural counties across the country, the old settlers are dead. Birth rates and family sizes have plummeted, especially after the post-Depression and post-World War II baby boom. When my second child was born in 1976, our congregation had two baptisms and 16 funerals. There have always been clear exits. The number of farmers has fallen due to mechanization and scale biases in government subsidies. People who went to college stayed away, as did high school graduates who could get good jobs in “the cities”, Sioux Falls, SD, Denver, Los Angeles, Grand Rapids, Michigan and even Toronto.

School quality is a factor for some states. The great industrial age migration from Alabama and Mississippi north to Chicago and Detroit was driven by jobs and Jim Crow, but also by schools considered better than in the segregated Deep South. Yet despite North Dakota’s fine state schools and universities, and overall high levels of education, it has always exported people, except for the brief oil boom.

Relative tax rates and other government charges can be a controversial issue, politically, as they relate to quality of life. Republicans view Minnesota’s high local and state taxes relative to average incomes and value of production, along with business development regulations, as a major motivator for emigration. Democrats would counter that taxes and other government services improve the quality of life – from better schools to clearing snow from the streets. The red states of Florida, Texas, Oklahoma and other southern states impose lower taxes. Florida and Texas don’t even have personal income taxes, although both have higher sales and excise taxes than our state.

There are certainly people whose migration is motivated by taxes. The problem is determining how much and where. It’s very difficult and it’s never been done on a large scale and with any degree of precision.

The problem with finding objective evidence is that the incremental fraction of income that goes to taxes varies with age, education, and income levels. A local think tank once published a study trumpeting hosts of people fleeing Minnesota’s high taxes. The proof? A survey of CFOs for High Net Worth Individuals showed most thought it was important. It was a gift for economics professors who used it as an example of how even high-income, educated people can fail at basic critical thinking.

Certainly, high-income retirees can escape harsh winters and reduce taxes paid by moving to any Gulf Coast state. But if you’re younger, have a BS or post-graduate degree in STEM, you’ll find more relative jobs, usually better paid, here than in the South. Politically, the culture here is more gay-friendly, abortion remains legal, and the more pervasive conservative religion repels young college graduates.

Red states and blue states offer options for recreation, arts, and culture. Thanks to generous stadium subsidies, we have more major league professional sports per capita than any other metropolitan area. Texas and Arizona have nice big universities, but no other low tax states.

No one would move to Oklahoma for its public schools or most parts of the Deep South, and that’s where, for young families, a low-tax political priority can clash with the public goods on offer. .

Average per capita incomes have delicate nuances, but Minnesota’s is 8% higher than Florida, 10% higher than Texas, and about 20% higher than Georgia, Oklahoma or arizona. But compare the Metropolitan Statistical Areas for the Twin Cities, Miami, Dallas or Phoenix and they might be different. North Dakotans earn as much as we do and it’s a tolerant, moderately taxed state, but its population is stagnating.

It is a debate that will not end. Technology is changing where people can work and COVID is changing many priorities. The future will be interesting.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.


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