Conservatively Speaking

A new welfare migration to Wisconsin

Posted by Mary Lazich on Nov. 28, 2008

Taxes

Wisconsin has a moving problem. Too many are voting with their feet.

Our state’s high level of taxation is forcing too many residents to pack up and leave. During November 2005, the Wisconsin Taxpayer Alliance issued a very troubling report entitled, "Moving In, Moving on: Migration in Wisconsin."  During the five years prior to the 2000 census, almost 669,000 people either moved to or out of Wisconsin. However, the net in-migration into Wisconsin was a meager 7,282.

Individuals with college or advanced degrees were more likely to leave, while those with less education tended to come. Individuals with household incomes above $75,000 left Wisconsin. Those with incomes of $200,000 or more had the highest rates of leaving.

The huge exodus of wealthy Wisconsinites leaving the state caused a loss of an estimated $4.72 billion in net worth and a loss of $455 million in income over the five years of this study. That means far fewer in-state bank deposits, less stock in Wisconsin firms, less investment capital for in-state ventures, and less money given to local charities.

Arthur Laffer, president of Laffer Associates and Stephen Moore, senior economics writer for The Wall Street Journal editorial board confirmed that high taxing and spending have had a negative impact on Wisconsin’s ability to compete and cause many people to relocate elsewhere.

Laffer and Moore write in the Wall Street Journal, “Five of the states near the bottom of our competitiveness ratings -- Illinois, Maryland, Michigan, New Jersey and Wisconsin -- have enacted major tax increases.” Laffer and Moore say the record movement of citizens across America has little to do with the weather. They say the states with the most dynamic and desirable economies are generally the states with the lowest tax, spending and regulatory burdens. These states win the battle for the prized commodity of human capital. The big losers are high taxing and spending states in the Midwest and Northeast.

New evidence suggests the disturbing pattern continues.

The Woodrow Wilson School of Public and International Affairs at Princeton University released a study during September 2008 examining migration trends in New Jersey. The authors compared New Jersey to states that tend to attract low???income individuals, while seeing a relative outflow (or much smaller inflow) of wealthy individuals. The study said Wisconsin is a good example, being one of the five states in the country with the most negative correlation between income and net migration. The list includes Wisconsin, Arizona, Delaware, North Dakota and Arkansas.

The study says the following about Wisconsin:

“At low income levels, there is strong net in-migration into Wisconsin; however, at higher income levels, in???migration is small or negative. Hence, one can say that Wisconsin is more attractive to low???income individuals than high???income earners.”

Authors concluded that in New Jersey, “poor people leave, but rich people do not.” In Wisconsin, “on average, poor people move in, but rich people do not.”

Why is Wisconsin so enticing to so many poor?  A University of Wisconsin-Madison economics professor provided an answer in his presentation to a Federal Reserve Bank of Minneapolis conference on the Midwest economy during June 2008. John Kennan displayed graphs showing Wisconsin dishes out the highest welfare benefits in the Midwest. You thought we ended welfare as we know it? Time limits have been placed on benefits and there are more stringent work provisions. But the size of benefits remains generous.

Factor in other benefits like child care, BadgerCare, the earned income tax credit, and low income housing, and the incentives for low-income residents to flock to Wisconsin are quite evident. The term, “welfare magnet” may have disappeared for some time in Wisconsin, but this new data seems to suggest there could be an entirely new welfare migration taking place.

This migration is clearly putting a strain on our finances. Just how much it is costing in taxes is unclear but my guess is that it is substantial and needs further study.

Meanwhile, our wealthiest leave Wisconsin, taking with them their tax revenues, spending, savings, investments, and charitable contributions. To stop people from voting with their feet in Wisconsin, we must stop the hemorrhaging of taxing and spending.