Taxes and Population Growth

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"Taxes and Population Growth"

Here’s some nonsense from Michael Barone:

[Population] growth tends to be stronger where taxes are lower. Seven of the nine states that do not levy an income tax grew faster than the national average [over the past 10 years]. The other two, South Dakota and New Hampshire, had the fastest growth in their regions, the Midwest and New England. Altogether, 35 percent of the nation’s total population growth occurred in these nine non-taxing states, which accounted for just 19 percent of total population at the beginning of the decade.

I’m a bit surprised to see Greg Mankiw endorse this since it’s incredibly sloppy economics. What kind of economist forgets about prices? Surely Mankiw’s noticed that land in Cambridge, MA is more expensive than land in New Hampshire. If housing supply were totally unconstrained, then it might make sense to look purely at population flows, but it’s not. Note that population is rising in virtually every state, so it’s not like people are fleeing high tax jurisdictions. But the natural tendency is for population increases to be concentrated in places where it’s easy to get permission to build new houses for people to live in. After all, where else are people going to go? For more people to live in Harvard Square it would have to be legal to build more housing units there, and it’s not.

This strikes me as an example of the American right’s tragic over-emphasis of income tax issues, since the correct explanation here is also free market and “rightwingy” but weirdly neglected. I don’t think tax-averse rich people are going to flee New York and Silicon Valley en masse to take advantage of low taxes in Sioux Falls. But middle class people really will flee to places where they can afford homes.

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