Michigan’s Gift to Texas? People

Michigan’s Gift to Texas? People
April 6, 2010

Recent primary elections in Texas have once again highlighted that state's status as a place people are moving to rather than away from. This makes it a focus of public policy interest for economists and demographers who want to know what makes the Lone Star State perhaps the most dramatic of several American "destination" states.

Michigan, by contrast, is certainly the most dramatic "flight" state.

The numbers are stark. Since 2000 Michigan's population has decreased by 540,750, or 5.4 percent, through domestic migration. Texas, by contrast, has added 848,702 residents, a 4.1 percent gain. The meaning of these numbers cannot be overemphasized: There is perhaps no better measurement for evaluating quality of life issues than migration.

Americans are no strangers to the idea that liberty brings economic opportunity, and the migration patterns we're witnessing are simply the effects of economic liberty, as an abudance of research makes clear.

Supporting Studies
Hundreds of scholarly studies have shown empirical links between economic factors and American migration patterns. Over the past decade migration economists have narrowed their research down to a number of key determinants such as taxes, welfare, weather, labor markets (including wages), and unemployment rates.

The Mackinac Center's own migration study—written by adjunct scholar Michael Hicks—found people nationwide are moving to states with lower taxes, more flexible labor climates, and more days of sunshine.

Specifically, Hicks discovered for every 10 percent increase in personal taxes, Michigan loses 4,900 people every year thereafter. That means the 11.5 percent personal income tax increase the Legislature imposed in 2007 has already driven more than 10,000 people out of Michigan.

By contrast, Texas has no income tax. This would be a distinct advantage even if its overall tax burden were higher than Michigan's, and in fact it is lower. The Washington, DC-based Tax Foundation reports in 2008 Texas had the 43rd lowest state and local tax burden in the nation, while Michigan came in at 27th.

Migration Variables
Taxes are just one variable among many. Michigan's hostile labor climate and regulatory regime are also adding to the lack of opportunity that's chasing people away.

The American Legislative Exchange Council in Washington, DC, has published a "Competitiveness Index" based on 15 policy variables in each state, such as income and corporate taxes, tax "progressivity," and right-to-work protections. Based on these metrics, the authors created "economic outlook" and "economic performance" rankings.

Michigan's "outlook" ranked 34th in the 2009 version, and Texas’s ranked 10th. In economic performance Texas took the No. 1 position, and Michigan came in dead last. This supports the link between economic freedom and opportunity.

The Pacific Research Institute in California compiles an index incorporating 143 different variables in five categories designed to measure economic freedom. In its most recent report (2008) the institute ranks Michigan the 43rd economically freest state and Texas the 31st. The authors then conducted a statistical analysis of state-to-state migration, and their index showed migration to be correlated with economic freedom.

Florida Is Top Choice
People move to Texas from all over. When we shift the focus to specific pairs of states, Florida remains the top migration choice for outbound Michigan residents. Between 2000 and the end of 2008, on a net basis, approximately 68,000 Michiganders moved to the Sunshine State, according to Internal Revenue Service data.

Texas ranks second for Wolverines among favored places to move. From 2007 to 2008, 12,748 Michigan residents moved there, while 5,272 Texans came to Michigan, for a net outflow to the Lone Star State of 7,746.

Dramatic Increase in Emigration
The IRS data can be broken down by county. We examined population flows from Michigan's three biggest counties to Texas. The gross outflow appears to have increased dramatically in recent years. For example, the number of people moving from Macomb County to Texas increased from approximately 200 between 2003 and 2004 to 748 from 2007 and 2008, a 274 percent difference.

For people from Oakland and Wayne counties, the Texan county of Harris (which encompasses Houston) was the most popular destination. For Macomb it was the Dallas/Fort Worth area (Note: The IRS does not report flows by county if there were fewer than 10 returns in a given inflow-outflow.)

This is the backdrop against which Michigan now faces a new round of demands for tax increases, including Gov. Jennifer Granholm's call for a $900 million tax hike over three years.

Michael D. LaFaive (LaFaive@Mackinac.org) is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Michigan.