Opinion: Tax changes could keep Mississippians in-state

Posted on Nov 1 2018 - 5:50am by Brett Kittredge

Few people would argue with the beauty of a California sunset. The bright lights of Times Square are tough to compete with. But there is one thing that can top the allure of California or Manhattan: your pocketbook.

While many on the left may argue that a certain class of Americans enjoy the high-tax, high-regulation burdens of our most liberal cities and states and the perceived protections that go with them, the numbers paint a different picture.

Americans are moving to lower tax states where they are able to keep more of the money they earn. This isn’t a talking point, but a statistical reality based on migration data. Unfortunately, Mississippi is on the wrong side of both taxes and, as a result, in-migration.

Sales, property, and individual income taxes, as a percentage of personal income in Mississippi, are 9.9 percent, according to CATO Institute. That’s pretty high. In fact, only 14 states, including traditional high tax states like California, Connecticut, New Jersey and New York, fared worse. All neighboring states had lower tax burdens than Mississippi. What effect does this have?

Mississippi had a net migration loss of over 3,500 in 2016. On a per capita basis, this means Mississippi lost 100 residents for every 88 the state gained. This is parallel with migration losses in Louisiana. Alabama and Arkansas were essentially flat in terms of migration while Tennessee added over 13,000 residents. For every 100 residents that Tennessee lost, they added 119.

Tennessee, a state without an individual income tax, is home to one of the lowest tax rates in the country with a tax burden of 6.5 percent. And they are reaping the benefits of smart fiscal policy.

The Wall Street Journal reported in May, “Alliance-Bernstein Holding LP plans to relocate its headquarters, chief executive and most of its New York staff to Nashville, Tenn., in an attempt to cut costs…In a memo to employees, Alliance-Bernstein cited lower state, city and property taxes compared with the New York metropolitan area among the reasons for the relocation. Nashville’s affordable cost of living, shorter commutes and ability to draw talent were other factors.”

Twenty-six states had a tax burden of 8.5 percent or greater. Of those 26 states, 25 had a net out-migration. Only Maine was able to buck the trend. And not surprisingly, of the 17 states that had net migration gains in 2016, all but one has a tax burden of less than 8.5 percent. All totaled, more than 500,000 individuals moved from the top 25 highest-tax states to the 25 lowest-tax states in 2016. Those high tax states lost an aggregate income of $33 billion.

Along with the relatively high individual tax burden, our business tax climate sits at 31st best, according to the Tax Foundation. Not terrible, and actually better than Alabama, Arkansas and Louisiana, but not great either. The same report had Tennessee at 16.

So what can we do in Mississippi? We can follow the lead of high-growth, low-tax states in the Southeast that have lower taxes, lighter licensure and regulatory burdens and a smaller government.

This past session, the legislature debated a bill known as the “Brain Drain” Tax Credit. It would have provided a three-year income-tax exemption to recent college graduates who are Mississippi residents. And there was an additional two-year exemption for those who start a business. It passed the House unanimously but died in the Senate without a vote.

States are in competition with one another. We know this because we routinely offer incentives for select companies in the form of subsidies or tax breaks, or we propose eliminating the individual income tax for three-to-five years for recent college graduates.

While we are always in favor of lower taxes, these moves are just an acknowledgement that our tax burden hurts individual opportunity and the state’s economic growth. We have succeeded in phasing out the lowest income tax bracket. Instead of eliminating the income tax for just a few, we should work on eliminating the income tax for all taxpayers. And instead of offering incentives to just a few, our goal should be to create the most business-friendly climate in the country – for all types, sizes and industries.

A public policy based on freedom is the recipe high-growth states have adopted. It’s how we’ll grow our economy in Mississippi, too.

Brett Kittredge is the Director of Marketing and Communications for Mississippi Center for Public Policy, the state’s non-partisan, free-market think tank.