Each year, birds fly south for the winter in a great migration before returning in spring. Tax migration in Wisconsin works much the same way. People leave for warmer weather and states like Texas and Florida, which have lower overall tax burdens.
Unlike the birds, however, those Wisconsinites might not return back north.
An analysis by Wisconsin’s MacIver Institute said $2.3 billion and 35,788 people left the state from 2011 to 2016, an average of $463 million and 7,158 tax filers annually.
The analysis also said 5,185 fewer households filed tax returns in Wisconsin between 2015 and 2016.
Ola Lisowski, who wrote the analysis, said Wisconsin residents were moving to states like Florida, Texas, Arizona and Colorado, which have lower tax burdens.
Chris Rochester, communications director for the MacIver Institute, said despite improvements made under Republican Gov. Scott Walker’s administration, there is still more to do.
“So, clearly, there is a problem that Wisconsin has with losing residents, losing revenue and losing wealth to tax migration,” Rochester said. “There has been a lot of progress made by Gov. Walker and conservatives in the legislature. They have cut taxes by $8 billion since they took over, but I think the data that our analysis shows is that there is still a lot of work to do if Wisconsin wants to stay competitive.”
Michael Jahr, vice president for outreach and special projects at the Badger Institute, said Wisconsin is a high-tax state when it comes to personal income and property taxes. He said the issue would be exacerbated by the recent federal tax overhaul because there is a cap on deductions from state and local income tax payments.
“So, high earners in Wisconsin are going to be saddled with potentially an even higher tax burden than they faced already and that is going to encourage people to look elsewhere, to go to states that have no income tax and go to states that have a more fair, balanced and equitable tax structure,” Jahr said.
Wisconsin needs to find a way to lower the personal income and property tax burden, Jahr said, because of the burden it places on businesses and individuals and the deterrent from investing.
“We can’t compete as much on winter weather, but we certainly should make our tax environment much more inviting,” he said.
Dale Knapp, research director at Wisconsin Policy Forum, said young families were migrating to the state because of its quality public schools, recreational facilities and relatively low crime rate. He said looking both ways is important to consider when examining a state’s migration.
“When you look at migration, you can’t just look at out-migration, you look at both directions to get a sense of what is really going on,” Knapp said.
In terms of retirees and trying to keep them in Wisconsin, Knapp said the state constitution has a uniformity clause, which means all property has to be taxed the same. Other states do not have that clause and can generally allow for breaks. He said in 2007, the tax on Social Security was eliminated to give seniors a small break, but he said the effects of that decision were not known.
Young people from age 20 to 30 are often looking for a city experience and higher wages, Knapp said, adding that white collar wages in Wisconsin were 10 to 15 percent less than the national average.
The analysis by the MacIver Institute said that the tax burden is not the only factor for people leaving the state, but it cannot be ignored. Lisowski said as a result, the state should consider lowering taxes across the board.
Rochester said Wisconsin could work to make improvements by reducing its tax burden. He also pointed to a previous proposal the institute made for a 3 percent flat income tax.
Rochester added that Wisconsin needs to attract new residents and pointed to a campaign by the Wisconsin Economic Development Commission to attract millenials from Chicago. Changes to the tax code would be an extra message to that campaign, he said.
“I would suggest that a good complement to that would be to make another major reform to the state’s income tax code to make the state more attractive,” Rochester said.
The analysis by the MacIver Institute said the Walker administration passed a $6.8 million initiative to attract young people and veterans by touting its low cost of living.
Amy Hasenberg, press secretary for Walker, said the message the WEDC sends to Chicago is about Wisconsin’s many opportunities.
“Wisconsin’s strong economy has resulted in the lowest unemployment ever in state history and more people are employed now than ever before, which means it’s more important than ever before to attract and retain a strong talent pool,” Hasenberg said. “ WEDC’s strategic investment delivers the message to Chicago millennials that Wisconsin offers unlimited opportunities for personal, professional and business success.”