| October 10, 2013
Money Walks
As we pointed out last month in these pages (“Voting with Their Feet”), Oklahoma’s net migration has improved significantly since pro-growth policies such as Right to Work and tax cuts have been implemented. Some have denied that policy matters to migrants, but the pattern of Oklahoma’s migration tells us differently — Right to Work and tax cuts have helped boost in-migration.
The IRS data also provide migrant data by state, which is useful in determining where out-migrants are going and where in-migrants are coming from. Tables 1a, 1b, and 1c rank the net migration totals for the years 1995 to 2009 for taxpayers (households), exemptions (people), and adjusted gross income (income; AGI), respectively.
As shown in Table 1a, in terms of households the in-migrant states are California (13,622), Kansas (5,140), New Mexico (1,560), Michigan (1,505), and Illinois (1,435). On the other hand, the top out-migrant states are Texas (-15,850), Georgia (-1,536), Virginia (-1,183), North Carolina (-1,070), and Tennessee (-808). Overall, Oklahoma gains households from 31 states while losing taxpayers to only 19 states.
As shown in Table 1b, in terms of people the top in-migrant states are California (38,437), Kansas (11,783), New Mexico (3,990), Illinois (3,848), and Louisiana (3,314). On the other hand, the top out-migrant states are Texas (-20,318), Georgia (-2,400), Virginia (-2,261), Missouri (-1,954), and Florida (-1,771). Overall, Oklahoma gains people from 33 states while losing people to only 17 states.
As shown in Table 1c, in terms of income the top in-migrant states are California ($513,718,000), Kansas ($208,553,000), Illinois ($71,221,000), Louisiana ($52,086,000), and Michigan ($50,305,000). On the other hand, the top out-migrant states are Texas (-$1,100,252,000), Florida (-$254,192,000), Colorado (-$102,871,000), Arkansas (-$102,283,000), and Missouri (-$89,951,000). Overall, Oklahoma gains income from 24 states while losing income to 26 states.
To better understand the recent surge of in-migration into Oklahoma, an examination of why residents are choosing to leave their home state is instructive. As shown in Table 2, one way to do this is by comparing various characteristics of Oklahoma versus the origin states.
In economic terms, migrants are expressing their “revealed preferences” by moving to another state more in line with their preferences and values. We compare Oklahoma to these origin states via some common variables used in migration studies—state and local tax burdens, union membership, population density, cost of housing, and average temperature. (For a comprehensive examination of the migration literature and determinants of migration, see our 1995 study, “The County-to-County Migration of Taxpayers and Their Incomes, 1995 to 2006,” co-authored with Arthur P. Hall.)
State and Local Tax Burden
This variable measures total state and local taxes collected as a percent of private-sector personal income as averaged over the 1995 to 2009 time period. Oklahoma’s average tax burden was 14.48 percent. In-migrants came from states where tax burdens were higher: for households it was 3.36 percent higher (14.97 percent), for people it was 3.3 percent higher (14.96 percent), and for income it was 4.35 percent higher (15.11 percent). At the same time, Oklahoma out-migrants left for states where tax burdens were lower: for households it was 10.18 percent lower (13.01 percent), for people it was 10.67 percent lower (12.94 percent), and for income it was 9.58 percent lower (13.09 percent).
Union Membership
This variable measures the percentage of the state’s employed labor force who are members of a union as averaged over the 1995 to 2009 time period. Oklahoma’s average union membership was 7.5 percent. In-migrants came from states where union membership was significantly higher: for households it was 87.4 percent higher (14.1 percent), for people it was 89.2 percent higher (14.3 percent), and for income it was 94.61 percent higher (14.7 percent). At the same time, Oklahoma out-migrants left for states where union membership was even lower: for households it was 13.66 percent lower (6.5 percent), for people it was 14.66 percent lower (6.4 percent), and for income it was 10.37 percent lower (6.8 percent).
Population Density
This variable measures total population divided by land area and is averaged over the 1995 to 2009 time period. Oklahoma’s population density was 50.9 people per square mile. In-migrants came from states where population density was significantly higher: for households it was 219.4 percent higher (162.7), for people it was 232.2 percent higher (169.2), and for income it was 283.8 percent higher (195.5). At the same time, Oklahoma out-migrants left for states where population density was higher, but lower relative to in-migrant states: for households it was 125.6 percent higher (114.9), for people it was 137.6 percent higher (121.1), and for income it was 122.6 percent higher (113.4).
Cost of Housing
This variable measures the median cost of housing as reported from the 2000 Census. Oklahoma’s median cost of housing was $70,700. In-migrants came from states where cost of housing was significantly higher: for households it was 109 percent higher ($147,779), for people it was 121.6 percent higher ($156,653), and for income it was 115.5 percent higher ($152,389). At the same time, Oklahoma out-migrants left for states where cost of housing was higher, but lower relative to in-migrant states: for households it was 32.1 percent higher ($93,377), for people it was 31 percent higher ($92,624), and for income it was 35.1 percent higher ($95,517).
Average Temperature
This variable measures the annual average of the daily mean temperature. Oklahoma’s temperature by this measure was 60.1 degrees Fahrenheit. In-migrants came from states where temperature was lower: for households it was 5.3 percent lower (56.9 degrees), for people it was 3.72 percent lower (57.9 degrees), and for income it was 4.65 percent lower (57.3 degrees). At the same time, Oklahoma out-migrants left for states where temperature was higher: for households it was 6.65 percent higher (64.1 degrees), for people it was 6.79 percent higher (64.2 degrees), and for income it was 6.22 percent higher (63.8 degrees).
Overall, people are most inclined to move to Oklahoma from places where state and local taxes, union membership, population density, and the cost of housing are higher and temperatures are a bit colder. Or, more simply, people come to Oklahoma for lower taxes, fewer unions, more space, and more affordable housing.
At the same time, Oklahomans are inclined to move to places where state and local taxes and union membership are lower and temperatures are warmer. While they also move to areas where population density and the cost of housing are higher, it is pretty hard to move to areas where they are lower since Oklahoma is already very competitive in these metrics.
From a policy perspective, it is especially telling that in-migrants are coming from higher-tax states and out-migrants are heading to states with lower taxes. This strongly suggests that not only are taxes an important driver of migration, but Oklahoma also could further improve its net in-migration by further reducing tax burdens, especially by reducing and eventually eliminating the personal income tax.
Additionally, Oklahoma’s Right to Work law has boosted in-migration since in-migrants are coming from states with higher union membership, while out-migrants are heading to states with even lower union membership.
Policy can and does influence migration.
OCPA research fellow J. Scott Moody (M.A., George Mason University) has worked as a public policy economist for more than 13 years. Formerly a senior economist at the Tax Foundation and a senior economist at the Heritage Foundation, he has twice testified before the Ways and Means Committee of the U.S. House of Representatives. His work has appeared in Forbes, CNN Money, State Tax Notes, The Oklahoman, and several other publications.
OCPA research fellow Wendy P. Warcholik (Ph.D., George Mason University) formerly served as an economist at the U.S. Department of Commerce’s Bureau of Economic Analysis, and was the chief forecasting economist for the Commonwealth of Virginia’s Department of Medical Assistance Services. She is a co-creator (with J. Scott Moody) of the Tax Foundation’s popular “State Business Tax Climate Index.”