Is The Tax Code Driving Taxpayers From Wisconsin?

To: MacIver Institute, Madison, Wisconsin                                              October 17, 2014
      Attn: Nick Novak and Matt Crumb
                              and
      National Center for Policy Analysis (NCPA), Dallas, Texas
      Attn: Pamela Villarreal

Re: Is The Tax Code Driving Taxpayers From Wisconsin?
      August 2014.  An Analysis of Wisconsin Taxes
                                                                           
Some of us in St. Paul have been reviewing your study on Wisconsin taxation.  We believe we understand what you’re trying to accomplish.  We do, however, have uncertainty about a few of your assumptions and the parameters used.

Using an assumption that all will live to age 100 and die penniless does seem to defy known reality and logic. Indicating that all states have the same job availability and advancement potential, especially for couples, may be a stretch.  It is probably not a good idea to equate Florida property taxes as half of Wisconsin’s without factoring in the high cost of property insurance and exclusionary risks plus the dire straits of property insurance in Florida.

We can sympathize with your outflow of IRS adjusted gross income (AGI) at $136 million per year.  Minnesota does beat you with an outflow of $340 million.  That’s $2.50 to $1.

We published an article in December 2013, “The Great Minnesota Exodus Tax Acts of 2013”, available at gopherstatepolitics.blogspot.com showing a Wisconsin retiree paid about two-thirds of the state income tax that a Minnesota retiree would pay.  Identical figures were used.

For a more detailed look and taxpayer population movement, you might consider going to the Center of the American Experiment’s April 2013, “Minnesotans on the Move to Lower Tax States” (americanexperiment.org).  This considers the highest 10 states contributing AGI to Minnesota and the 10 who received the most outflows from Minnesota.  Wisconsin is not shown because of lesser back and forth activity.  The study covers the period 2005-2010.

If we add the data for Wisconsin-Minnesota moves, we find that a few more Badger taxpayers moved to Minnesota than did Gophers to Wisconsin.  However, the Minnesotans bring with them a slightly higher AGI and Wisconsin ends up being a net beneficiary of $33.9 million over that timeframe.

We find that only North and South Dakota sent a lower AGI to Minnesota than did Wisconsin to Minnesota.  The only other figures in or out of any of the states in the study lower than Wisconsin’s are the average Minnesota outflows to North Dakota.

Wisconsin net AGI flows to Florida, Arizona, Texas, Colorado and North Carolina   according to the NCPA-MacIver report.  Minnesota net AGI flows to Florida, Arizona, Texas, Colorado, Washington, South Dakota and North Carolina.

Minnesotans moved to South Dakota at a population-adjusted rate of almost exactly twice that of moving to Wisconsin and also three times the rate of moving to Iowa.  See gopherstatepolitics.blogspot.com, “Why Do Minnesotans Move to South Dakota?”  To complete the neighboring states please see the same web site, “The Shame of Minnesotans Having to Move to North Dakota”.

This brings us full circle back to the question of why does Minnesota lose $2.50 of AGI for every $1 of Wisconsin’s?

The population numbers are close, the gross state products (state GDP) are relatively close, the tax climates are not too far apart, the regulatory loads are about the same, the weather is similar and the people are pretty much alike.  So why the stark difference?

We haven’t discussed estate taxes.  North Dakota, South Dakota and Wisconsin have none.  Iowa has an inheritance tax but it does not apply to lineal heirs.  Only Minnesota taxes you when you die.  Do a number of wealthier Minnesotans head for the hills of the “no estate tax states”?  Florida, Arizona, Texas?  Good question.

Wisconsin, you’ve been sending Minnesota your poorer taxpayers.  Please send us your wealthiest.  St. Paul has very high property taxes so they’ll feel right at home.  Send those with the highest incomes to Edina where they can reap the 9.85% income tax bracket named in honor of the progressive Edina voters.  And, Minnesota Revenue will love their estates.

Bob Smith 3rd
Gopher State Politics Institute
GopherStatePolitics.blogspot.com
480 St. Clair Avenue
St. Paul, MN 55102
651-222-6888