In recent years, Minnesota conservatives have fretted over the net loss of population to other states. As with nearly every problem the state confronts, the culprit—according to conservatives—is Minnesota’s progressive tax and fiscal policy. The problem with this theory is that it does not jibe with the facts—especially the most recent information from the Internal Revenue Service (IRS) and the U.S. Census Bureau.
IRS “Statistics of Income” tabulate the number of tax returns filed in each state and the number of exemptions claimed on those returns; the most current data looks at the migration of tax filers* between states from 2015 to 2016. The number of tax filers and exemptions leaving Minnesota has always comprised a small fraction of all Minnesota filers and has always been easily surpassed by natural population growth and international immigration. Since 2013, the share of tax filers who left Minnesota for other states has steadily declined. From 2015 to 2016, they comprised just 0.06% of all tax filers and 0.02% of all exemptions.
Even better news on the migration front comes from the July 2017 population estimates from the U.S. Census Bureau. From July 1, 2016 to July 1, 2017, more people moved to Minnesota from other states than left Minnesota to go to other states—the first time this has occurred since 2002. Minnesota’s net population increase due to domestic migration (7,941) comprises 0.14% of the state’s 2016 population and approximately 15% of Minnesota’s total 2016-to-2017 population increase.
Conservatives contended that Minnesota would suffer a variety of economic ills as a result of progressive tax increases enacted in 2013, including an exodus of Minnesota taxpayers. The data from the IRS and the Census Bureau indicate that these fears were unwarranted. Consider the following four realities that undermine conservative claims of tax-driven population flight.
First, Minnesota’s net domestic out-migration of tax filers and exemptions has declined steadily since passage of the 2013 tax increases. Domestic net out-migration in Minnesota emerged during the last decade—coinciding with a period when a “no new tax” fiscal agenda was contributing to a decline in real per capita public resources and investments. Now that Minnesota has restored a portion of these budget cuts, the state has enjoyed the first increase in population due to domestic migration since the early 2000’s.
Second, Minnesota has bucked the trend of net population loss due to domestic migration common among other states in the region. Midwestern states† in general have seen a significant net migration to southern and western states—a trend driven in large part by retiring baby-boomers in search of warmer climes. Yet Minnesota is experiencing only a tiny loss of tax filers and exemptions and a small increase in population due to domestic migration.
Third, when it comes to domestic migration, Minnesota is doing much better than other Midwestern states that have followed a much more austere fiscal agenda. Wisconsin is a state much like Minnesota in terms of climate and demography. After several years of budget cuts, tax reductions, and anti-worker policies, Wisconsin continued to lose population due to domestic migration from 2016 to 2017 and has a much higher rate of domestic tax filer loss than Minnesota. And in Kansas—the poster child for conservative fiscal policy—the net population loss due to domestic migration is even higher. The number of taxpayers leaving Wisconsin and Kansas for Minnesota is significantly greater than those going in the opposite direction.
Fourth, net tax filer migration from Minnesota to Florida is significant (nearly 1,500 people from 2015 to 2016), while the net migration to neighboring South Dakota is miniscule. Both Florida and South Dakota have similar tax climates, including no state income tax. If tax climate was a major determinant of location decisions, neighboring South Dakota should be more attractive to Minnesotans than a state 1,600 miles away. This suggests that weather is far more important than tax climate in shaping location decisions.
IRS and Census Bureau information shows that—unlike the rest of the Midwest—Minnesota has averted a significant loss in tax filers and population due to domestic migration. These findings complement data from other sources which show that Minnesota has surpassed the national average in job, GDP, and income growth over the last decade. Once again, conservative claims that progressive tax and fiscal policies would ruin Minnesota’s economy have crashed into the hard wall of fact.
*As used here, the term “tax filer” refers to a person who files a federal income tax return.
†Based on the Census Bureau definition of “Midwestern states,” which includes Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin. Illinois is excluded from the graph for scaling purposes. Illinois’ estimated net population loss due to domestic migration from 2016 to 2017 is 117,779—eight times greater than the population loss of the next closest Midwestern state (Kansas); this comprises 0.89% of Illinois’ July 1, 2016 population.