Are Minnesotans really fleeing to low-tax states?
Minnesota conservatives have been issuing warnings about fallout from the DFL trifecta’s unabashedly progressive policy agenda in St. Paul this session.
One argument that’s come up repeatedly: DFL-favored policies, specifically ones involving taxation, are going to drive people away from the state.
“Is the DFL trying to chase people out of Minnesota?” asked economist John Phelan of the Center of the American Experiment, a conservative think tank, in an op-ed earlier this year.
Farmington Rep. Pat Garofalo struck a similar note recently, focusing on the flow of wealth rather than people: “Democrats are driving Minnesota into the same economic cesspool as Illinois and New York,” he said on Twitter. “In just 12 months, over $1.5 billion in adjusted gross income fled Minnesota to other states.”
This is a central argument of the legislative session: Democrats are betting that their support of education, child care and a stronger safety net, transit, housing, parks, legal marijuana and protection of LGBTQ people and abortion rights will entice people to move to the North Star State while keeping Minnesotans here.
Republicans say these policies — paid for with higher taxes and increased regulatory compliance costs — will drive people away and scare businesses into moving or declining to come here.
Phelan, Garofalo and others making similar arguments are correct about the numbers: Minnesota has been losing both people and dollars to other states in recent years, according to the latest figures from the U.S. Census Bureau and the Internal Revenue Service.
But the net change in any given year is small, representing just a fraction of a percent of the total population. Moreover, the factors driving those migration decisions tend to be a lot more complicated than political soundbites can capture.
Let’s start with the raw numbers: Between 2021 and 2022, according to Census data, Minnesota lost about 19,400 people to other states. That’s not necessarily unusual, as Minnesota has consistently lost thousands of people to other states nearly every year since the turn of the millennium. But the 2022 figure stands out for being the biggest single-year loss in at least three decades.
Still, there’s no denying the trend is downward over the past few years, enough so that Gov. Tim Walz has been publicly fretting over how to draw in workers from other states. “I’m going to run ads in Florida for teachers,” he recently told the Star-Tribune. “Come here! Yeah, it’s a little colder, but we’ll let you teach.”
On the other hand, Minnesota is hardly alone in experiencing a net loss to other states. The Census data show that most Midwestern states have lost population due to domestic migration since 2020. Of the four states bordering Minnesota – Wisconsin, Iowa and the Dakotas – only South Dakota has brought in more people from other states than it lost since 2020.
Looking at 2022 data and adjusting for total population, Minnesota is in the lower middle of the pack of U.S. states when it comes to migration gains and losses. Those percentages hint at something that’s often overlooked in these discussions: a loss of 19,400 people amounts to just 0.4% of the state’s total population of 5.7 million. Some other states, like New York, Illinois, and Louisiana, are losing a full percentage point of population or more to other locales each year.
We’re lower than where economic boosters would like us to be, perhaps, but not necessarily on the precipice of demographic disaster.
Or are we?
“Now, you can say that [a loss of 19,400 people] is equivalent to losing Hastings and not worry too much,” Phelan of the conservative Center of the American Experiment said in an interview. “Or you can say that Minnesota’s rate (net number of out migrants per 100,000 of the population) was worse than in 37 out of 51 jurisdictions, and that it is something to worry about.”
Phelan also points to IRS data showing that those outmigrants are taking their money with them. As Garofalo noted, that amounted to $1.5 billion in adjusted gross income in the most recent year, though the state’s annual gross domestic product of $446 billion dwarfs that figure.
“People leaving Minnesota have higher incomes than those coming in so that our state loses adjusted gross income to other states,” Phelan said. “Now, if you take income as a proxy for productivity, which is pretty standard in economics, that means that our state’s population is becoming less productive and that doesn’t bode well for its economic future.”
Phelan thinks the tax situation is one reason people are leaving Minnesota. Our state and local tax rates run higher here than in 38 other states, according to the Tax Foundation, a corporate-backed think tank that advocates for lower taxes. Phelan points to a recently published study finding “growing evidence that taxes can affect the geographic location of people both within and across countries,” with higher earners being especially likely to consider taxes when moving.
On the other hand, tax rates are far from the only factor affecting interstate migration decisions, and many economists say the link between taxes and moving is overstated: “Grossly exaggerated,” in the words of Michael Mazerov of the Center on Budget and Policy Priorities, a left-leaning think tank. Researchers have found that costs of living, job opportunities, recreation, crime and weather and climate have a major influence on where people move.
On top of all that, the COVID-19 pandemic has had far-reaching demographic consequences as people have reconsidered the relationship between where they live and where they work, in many cases severing it completely.
State demographer Susan Brower points to another, often overlooked factor as a key driver of Minnesota migration: college decisions.
“Most migrants are in their late teens and 20s,” Brower said via email. “I think it shows the large share of migration that’s driven by college choices.”
Census data analyzed by Brower’s office shows that the migration gap among those age 15 to 19 is particularly steep, with thousands more people in that cohort moving away from Minnesota between 2015 and 2019.
Those figures suggest that lawmakers interested in attracting more people to the state may want to focus more on higher education policy.
Beyond that, there are all the other components of population change to consider: births, deaths and international migration. Factor those in and Minnesota’s total population grew by about 0.1 percent in 2022, placing it again squarely in the middle of the pack on population change.
Overall, the data suggests that talk of residents “fleeing” for other states is overheated, at least for now. Some Minnesotans are leaving, but others are moving here to take their places. These annual shifts are small relative to the total population. And finally, the factors driving that migration are as complicated and varied as the individuals and families making those decisions.
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