Are Blue States Bleeding?
Busting More Migration Myths
Yesterday, the IRS released new Statistics of Income migration data. I summarized this data if you’re interested. Furthermore, I’ve reviewed a recent change that the IRS made to its calculation methods, explaining in detail why the new data is not strictly comparable to the old. But for those who follow migration issues in the U.S., you know that this IRS migration data is more than just academic — it is deeply political. From Travis Brown’s “How Money Walks” to my own previous work at the Tax Foundation to the liberal Center on Budget and Policy Priorities’ assertions, this IRS data commands an unusual level of political attention. State and local policymakers are sensitive to claims about policy-induced migration, and IRS data is the most commonly-cited evidence.
Cue Exhibit A: Steve Moore’s recent op-ed in Forbes arguing that new IRS migration data shows that “red states” are “bleeding blue states dry.” Moore is co-author of “Rich States, Poor States,” a publication that more-or-less claims that conservative governance is leads to more positive migration flows. Here’s the conclusion of his piece:
The latest Census and IRS data merely confirm what Americans can see every day with their own two eyes. Red states are a magnet. There’s a downside to this for sure. Conservatives have a legitimate gripe that as blue staters come into their prosperous red states, they try to turn them blue. That’s happened in New Hampshire where Massachusetts transplants vote for the left wing policies they just fled.
But the underlying trend is unmistakable: Liberal blue states are economic dinosaurs. Will they change their ways before they go the way of Detroit and become extinct?
As I’ll show, many of Moore’s migration-specific claims do not stand up to even basic scrutiny.
To me, that’s very unfortunate. Because, as long-time readers know, I actually believe that the policy mix Moore describes (low taxes, light labor regulations, public spending focused on strictly public goods) really is good and really does correlate with improved migration. But although Moore may be right in spirit, he’s simply wrong on facts.
Busting Migration Mythology
Americans Apparently Like Moderation
The graph above shows the net number of people migrating into blue, red, and purple states. For red states I take states where Mitt Romney won 60% or more of the vote. For blue states I take those where he won 40% or less. This is important: by my calculation, West Virginia and Kentucky are “red,” while Texas, for example, is “purple.” We need to make sure we know what we’re talking about with “red” and “blue” states. Moore makes claims implying we all know what states are included in those categories, but it’s really not so clear. Certainly my categorization is imperfect, but the point is, “red” and “blue” state migration track records are purely a function of how you define the terms. No state has all the policies Moore believes are desirable, and every state has some mix of “red” and “blue.”
But let’s look at the data anyway. First of all, recall that 2011 uses the old IRS methodology. So the change from 2011 to 2012 may just reflect a changing method. But the trend seems clear in all years. Migration out of blue states is heating up. Score 1 for Moore! However, migration out of red states is also growing. Whoops. Both red and blue states seem to be losing people.
The real story is the purple states. Americans are disproportionately migrating to states more likely to be politically diverse and competitive. Is that political balance a cause of migration? Maybe, maybe not. But the data we have seems to, if anything, argue for moderation between “blue” and “red” rather than adopting one politic exclusively.
Busting Migration Mythology
Taxes and Politics
The two charts above show the replacement rate (inflows divided by outflows) for the blue, red, and purple states at left, and for tax-grouped states on the right. The green line at right shows states with no general income tax on wages. The orange line shows states with a top rate over 8%. The brownish line shows all other states.
Although migration appears to be worsening in deep-red states, it appears to be improving in states with low income taxes. So we can’t necessarily say that “political redness” drives migration, but it does seem possible that policies may matter, and low/no income taxes seem to be broadly pro-migration.
For the above chart, I identified states that made their tax code more business-friendly or less business-friendly, according to the Tax Foundation’s State Business Tax Climate Index. This Index should pretty closely approximate the types of tax policies Moore favors.
The green line tracks states that made their policies “better” (i.e. reduced or simplified taxes, lowered rates, eliminated loopholes, improved transparency). The red line tracks states that made their policies “worse” (including in some cases by reducing taxes through carve-outs and loop-holes). As you can see, the “improvers” rise while the “worseners” fall. This association is hardly conclusive, but, again, seems to add weight to the idea that, on the margin, wide variations in tax policy may impact migration.
Okay, so far, so good. Moore was probably wrong about “red” states, but he’s closer to right on the question of what policies. Matter. But remember, among those no-income-tax states are Nevada, Washington, and New Hampshire: hardly deep-red states!
Busting Migration Mythology
Where Moore Has the Data Wrong
I’m going to restrain my true feelings on this one a bit. But let me make this very clear:
The IRS does NOT track the migration of income.
Money is not walking. The movement of money is called a remittance or a transfer. The U.S. government does not track such internal financial information, though we do track it internationally.
The “income” measured for IRS data is the income a filer earners before migrating. Not after. It’s not how much money they moved in the bank. And frankly, if they left their job, then somebody else will be hired, so that “income” won’t move at all.
The real economic consequences of migration come from (1) the children of migrants (2) the replacement of more talented by less talented workers (3) future increases in income and (4) local innovation and contribution. If a migrant goes on to start a company in their new home, that new company (which didn’t exist before migration) is the actual loss to the sending state, not the income the migrant earned at their old job. If a migrant moves ahead in their career and gets a raise, that raise is the loss of the sending state, not the base income the migrant had before.
But IRS data doesn’t show what migrants earn after migration.
And what about if income falls? Consider a retiree making $80,000 before retirement and $45,000 after. That would show up as $80,000 leaving, say, New York, and $80,000 entering, say, Florida. But the reality is that person was retiring either way: their income was going to fall to $45,000. So the loss to New York is overstated, and the gain to Florida is also overstated.
So let me say this one more time:
The IRS does not track the movement of financial resources. Rather, it tells you the socioeconomic class of migrants, and it tells you the overall economic scale of migration.
Busting Migration Mythology
Where Moore Has the Policy Question Wrong
There’s a lot of research on domestic migration. And most of it is pretty much in agreement. As far as policies go, pro-migration policies tend to be somewhat laxer regulation and lower taxes. But spending matters too. The research here is fairly clear as well: health and welfare spending tends to reduce migration, but spending on schools and infrastructure attracts migrants. For states with low taxes and low spending, a shift to slightly higher taxes and slightly higher spending actually can boost migration. Now, that doesn’t mean every state should be New York or California. Far from it.
But there’s an even more compelling policy question relating to why “red” states may not always get the most migrants. Once we control for economic growth and economic policy and geographic factors, a key determinant of migration relates to social attitudes and behaviors. For example, although more business-friendly regulations may draw migrants, the presence of pollution is widely confirmed to reduce migration substantially. So migration is high in places where firms are freer to pollute, but choose not to. Likewise, there’s been some research suggesting that social liberalism can draw migrants. Think of many of the cities drawing migrants these days: Austin, Texas; Washington, DC; Seattle, WA; Portland, OR. Whatever their economic policies, their social attitudes are likely to be decidedly more progressive.
High net-migration is not a product of “red state governance:” it is a product of governance intended to minimize barriers or costs to living in an area. Many “red” policies fall in this category, like a preference for low taxes, minimized non-essential spending, and a lighter regulatory touch. Other preferences, like for costly private schools, little public transit, and perceived unwelcoming attitudes towards foreigners, LGBT individuals, or others may in fact diminish net migration.
To put it bluntly, the “ideal” policy for high net migration isn’t Republicanism, it’s Libertarianism. But that might not be good. Maybe policymakers want to impose certain costs on living in an area. It’s easy to imagine numerous reasons, good and bad, that this might be the case. Net migration is not a good goal in its own right. Policymakers shouldn’t be focusing on trying to run up the migration score, but rather on providing the best public services at the lowest price to constituents. The result of this is likely to be healthy and sustainable migration flows: but not necessarily perpetual high net inflows.
Busting Migration Mythology
It’s the Economy, Stupid (Not the Weather)
Moore raises one last point where he is quite correct: migration is not about weather or air conditioning. This zombie idea just will not stay down. Sure, once upon a time in the 1960s to 1980s the introduction of air conditioning may have been a substantive shock to migration. But we’re literally talking about whole generations that have known AC their entire life now. This effect has come and gone. And weather as a continuing explanation is pretty weak.
The above chart shows the replacement rate for the states with the warmest and coldest winters. Migration to warm states is rising. So score 1 for the Weather-Causes-Migration crowd.
But wait, migration is higher to the coldest states than to states with milder climates. Whoops. In fact, while we said above that Americans maybe preferred moderate or competitive politics, it seems in weather, we’re a people of extremes. Hot or cold, but not in between.
Or maybe it’s just a statistical illusion. One way to check is to look at changes. How has temperature changed in each state? I mean, even aside from global warming, climate patterns do have short- and long-term cycles that lead to changes that would seem like they could show up in migration data.
The above chart tracks migration in the states with the biggest change in average temperature since 1970, and those with the least. And behold! Americans like the extremes. States getting warmer faster have seen rising migration, but so have those with the least warming. Once again, we would expect that, if temperature has some kind of vaguely linear effect on migration, this should be different. This is a far less compelling chart than we saw for taxes. Besides, think about it for a second: how many people move to Houston for the climate? And if it’s just weather that motivates migration, why are some of the cities with the worst migration records (Los Angeles, New Orleans) in quite warm climates?
Well, maybe weather actually doesn’t matter much. Maybe people move for jobs, family, lifestyle (which can relate to climate!), education, cost of living, and other similarly influential factors. Less than 2% of migrants identify climate as the main reason for their migration.
Let me put this in big letters so it sticks.
Weather differences don’t cause migration.
Busting Migration Mythology
Conclusion
Steve Moore’s Forbes op-ed mis-reads the basic facts of migration to make unfounded claims about the relationship between political conservatism and net migration. He’s a competent and respected economist, and should know better how to read pretty basic government data. While his argument is wrong, he is correct that low taxes and light regulation tend to boost net migration in a generally positive way. However, other policy and cultural factors that boost migration are decidedly less “conservative,” such as access to public transit and legal recognition for LGBT individuals. Furthermore, the op-ed perpetuates the flat-out false claim that IRS data tracks the movement of money. It does not. The IRS tracks the movement of people correlated with previous income. There is no research that I know of to estimate how closely that previous income may approximate post-migration income, and thus we can’t say what the “net income” for a given state may be.
Finally, Moore is correct in calling out another ‘zombie idea’ in migration: weather differences do not cause migration. While the impact of weather on the local industry mix and available lifestyles may matter some, very few people migrate “for climate reasons,” and the statistical connection between weather and migration is systematically impacted by endogeneity between weather and innumerable other geographic and economic factors.
See my last post, summarizing the new IRS SOI data.
Start my series on migration from the beginning.
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I’m a graduate of the George Washington University’s Elliott School with an MA in International Trade and Investment Policy, and an economist at USDA’s Foreign Agricultural Service. I like to learn about migration, the cotton industry, airplanes, trade policy, space, Africa, and faith.
My posts are not endorsed by and do not in any way represent the opinions of the United States government or any branch, department, agency, or division of it. My writing represents exclusively my own opinions. I did not receive any financial support or remuneration from any party for this research. More’s the pity.
