Think of the statistics our government keeps and publishes — the unemployment rate, the consumer price index or the gross domestic product. Would these numbers be useful to markets, policymakers or anyone else concerned about our nation’s economic performance if they were released whenever government officials felt like it?
The answer is obviously no.
That is why most government departments and agencies release economic indicators according to a schedule that allows everyone — from Federal Reserve Board governors to county managers – to use data consistently in forming policy.
Unfortunately, that is not the case with a key economic indicator put out by the Internal Revenue Service. The IRS tracks changes in the residential tax base which the agency’s Statistics of Income Division uses to show who is coming and going to every state and county in the nation.
Massive shifts in populations and taxable incomes from northern blue states to red states — most notably Florida, Texas and South Carolina — have been the trend in recent years. Released in sets of tax years, the agency takes individual filers’ tax return addresses and checks to see if and where they moved.
These are more than abstract numbers of interest to think tanks and demographers. They help explain why the 26-year-old, living in his or her parent’s basement and not on a private sector payroll, might be headed far away to find work. According to a Gallup survey on why people move, the ability to find work, taxes and cost of living are cited as main factors.
Interpreting the most recent data last year, the Washington Examiner‘s Michael Barone wrote that “there is a large migration away from high-tax states to low-tax states,” and a resulting wealth transfer of $7 billion among just six jurisdictions. The bottom line: State tax policy matters.
The problem is the IRS can’t seem to figure out when or even whether to release tax migration numbers. In 2012, the IRS publicly cancelled the program, but weeks later reversed themselves after media outlets (including the Washington Examiner) called attention to it.
Tax Foundation economist Joseph Henchman applauded the agency for continuing the program, adding an important caveat: “I’m immensely curious as to who ordered them to cancel it in the first place, and why.”
So are a lot of others, including myself. As a former governor from a blue state, I heard anecdotal evidence for years about people fleeing Maryland to surrounding states and along the I-95 corridor to Virginia, the Carolinas and on to Florida. On recent trips to Florida, which has no income tax, I ask people to raise their hands if they are from Maryland, which happens so often it is not a surprise anymore.
In a widely publicized finding, Maryland lost over 31,000 people and $1.7 billion in taxable incomes to other states between 2007 and 2010. Stemming tax flight and lowering the tax burden became a key plank in the GOP gubernatorial campaigns of Larry Hogan in Maryland, Bruce Rauner in Illinois and Charlie Baker in Massachusetts. These successful candidates proved that decisions in state capitols affect the lives of voters.
Fast forward to today. The IRS is now releasing data so late, and in such a haphazard manner, that it is becoming useless. As most of us are ready to file tax returns for 2014, the IRS will be releasing migration data for tax years 2011 and 2012 in July. This came just days after the agency said they would be released in “the fall.” Last year, the most recent numbers (for 2010 and 2011) were released in April.
Confused? So am I.
Fearing congressional scrutiny or negative press attention of canceling the program outright, perhaps the IRS now prefers to sweep the program under the rug, hoping nobody is paying attention. Most rational people would like to see the consequences of tax policy on economic growth in their states, instead of seeing it devolve into partisan politics.
The IRS has lost a lot of credibility during the Obama administration. Putting out tax migration data in a consistent, timely manner like other economic statistics, is an opportunity to get a little of it back.
Robert Ehrlich was governor of Maryland from 2003 to 2007. He is the author of America: Hope for Change. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
