Growth & Justice Blog

Business doesn't need to move to have an impact on a community

A Minnesota business expands in its home turf — North Minneapolis.

[T]he 25-year-old direct-mail and promotion-fulfillment company will receive no development subsidies from the city. It is expanding to consolidate its business in a stable neighborhood that is close to freeways for its customers and which boasts good workers.
[...]

Anderson, whose brother is CEO, said they could have saved money by moving the company to their hometown of Cambridge, Minn., and qualified for tax abatements and incentives under Gov. Tim Pawlenty's "JOBZ" rural-economic development program.

"We've made a commitment to north Minneapolis and we have neighborhood people who walk to work," Anderson said. "We decided that if we could make something work, we'd stay. We think our plan will work."

Like we said... subsidies aren't necessary when other attributes businesses need to thrive are present in a community.

Business sometimes gets painted as being only about profits and making decisions based on narrow tax considerations. That doesn't describe most of the business people I know. The owners of Impact Mailing made a good business decision, but it wasn't only about them.

— Charlie Quimby

A Minnesota business expands out of state. Are taxes to blame?

A valued, long-time Minnesota business announces it's expanding across the border. Is this more fodder for those who claim corporate taxes are driving business to lower-tax neighbors? Or does it illustrate how business expansion plans respond to a complex mix of factors?

South Dakota is usually cited as the destination for migrating Minnesota businesses — typically without naming any specific companies. But in this case, it's North Dakota that will benefit from an expanding Minnesota company.

Marvin Windows, headquartered in Warroad, has announced plans to nearly double the size of its facility in Grafton, ND, adding up to 50 new jobs over the next five years. Marvin's Warroad location employs about 2,500.

But lo and behold, North Dakota isn't quite a low tax haven of the sort we're told is going to strip Minnesota of its economic growth. In fact, it ranks just above Minnesota in total state and local taxes as a percentage of income and two places higher in corporate income tax rankings percentage of income. The complete state rankings compiled from Census Bureau data by Growth & Justice and the Minnesota Budget Project are here [pdf].

It's true North Dakota is a comparatively low personal income tax state, but the company isn't moving to there to lower income taxes for the owners. The Marvin family is staying put in Minnesota, and most of the 475 jobs created at the Grafton plant, which opened in 1997, have been filled by local residents. 

(1)Total revenue includes federal government revenue and own-source general revenue — which together make up general revenue — combined with utility, liquor store, and insurance trust fund revenue.

Let's look at some of the likely factors figuring in Marvin's decision.

Labor. The labor supply has to be a concern for Marvin, with its major manufacturing facility located in remote Warroad. Polaris Industries has a large plant in Roseau, the next nearest town. With two large employers drawing workers from the thinly populated region, at some point as they grew, they'd likely look elsewhere for labor.

Grafton, with a population of 4,600, is roughly the size of those two cities combined and is located in farm country, where skills, work ethic and the lagging farm economy offer a ready source of workers. Labor costs were lower in 2003, with the average job in the county paying $22.2k vs. $27.9k in Roseau county.

Location and Infrastructure. Though like Warroad, Grafton is relatively isolated, it's near the major north-south freeway artery Interstate 29, which meets east-west I-94 at Fargo. Grafton also connected east-west to Warroad. Marvin undoubtedly saw that infrastructure as an advantage when it originally located there. And having a plant already in that location meant the company was more likely to expand there than in a new place. Also, as an energy producing state, North Dakota has lower industrial power costs than Minnesota or South Dakota.

Incentives. Rolling out the green carpet might have a modest attention-getting effect — if the financial incentives are coupled with other positives in a community. Grafton was not one of the locations originally considered back in 1996 when Marvin was looking to expand, but it did put together an incentives package that included a new industrial park and a spec building to help interest site selectors.

This time, Marvin already announced its plans to expand before the city votes on a possible 10-year tax exemption for the addition and sponsoring an interest buydown on a loan. As we've noted before on subsidies, they make the less sense when a company is already in the region. It's unlikely, given the current housing construction market, that Marvin would be very interested in breaking ground in an entirely new location.

Business Taxes. Lest anyone think I'm gaming the numbers, here's the low-tax-advocating Tax Foundation's ranking of the states. Although North Dakota generally scores better than Minnesota on the "business friendly" indexes, it's nowhere close to South Dakota.

 

Let's pause here to make our general disclaimers about all tax rankings. Numeric rankings can distort small differences; they're based on averages or rates that don't necessarily apply to actual taxes in individual cases; they may not measure what they claim or even measure the right things in the first place. And just about any state or advocacy group can find a ranking that either rankles or reinforces, as shown in Grading Places: What Do Business Rankings Really Tell Us? [pdf].

Thirty-four of the 50 states can claim that they are in the top 10 in terms of business climate or competitiveness; they just have to pick which of the five indexes they want to point to. Business interests in just about any state can find at least one ranking to support an argument for cutting business taxes to make the state more competitive. In all but eight states, one can find at least one index that puts the state in the bottom half of all states.

Bottom line? While tax considerations may be part of a business expansion equation, it's never as simple as the low-tax advocates would like you to believe.

— Charlie Quimby

Tax enforcement is up, but are results?

A recent article in Forbes Small Business suggests pressure to speed up the resolution of IRS audits may be reducing the amount of money recovered — while increasing the stresses on compliant small businesses.

The IRS recently made an inexplicable decision to increase audits of small companies while easing up on large firms. In fact, the smallest companies saw the taxman 41% more often in 2007 than in 2005, and companies with $10 million to $50 million in assets were 29% more likely to be investigated, according to a new study from the Transactional Records Access Clearinghouse at Syracuse University.

Meanwhile, companies with more than $250 million in assets were almost 40% less likely to be audited than in previous years - even though an average audit hour of large firms earned the IRS about $7,500, the Syracuse study found, while a similar hour directed at smaller companies turned up $474.

Going after more small companies didn't produce that much more revenue, but it did enable the Bush Administration to tell the public it was going after more companies. In fact, the number of non-productive audits of small companies — meaning no change in tax liability was recommended after the audit — is growing. And now the administration is seeking a court order to bar future access to agency statistics that are essential for the Syracuse report that exposed this shift.

In Minnesota, the Department of Revenue compliance initiatives include identifying non-filers and collecting delinquent sales taxes as well as individual and corporate income tax audits, so it's hard to compare directly with the IRS. However, in the report the Department makes to the Legislature, it is clear that Minnesota taxpayers see a pretty good return on the money spent.

Here's a table from the Department's report [pdf] showing the revenue realized from compliance and enforcement. Dollars spent on corporate tax matters show a much higher rate of return, and recovering sales and use taxes produces the most revenue dollars.

Lately, the Department has published a monthly list of businesses that are delinquent in paying sales taxes they've collected. Of the 64 entities listed for June, all appear to be small companies (including one that owned several truck stop-related businesses). Smaller towns outstate accounted for 24 of the companies, with the remainder split between metro/larger outstate cities and suburban addresses.

It's wrong to use tax money to prop up a business's cash flow, of course, but if small businesses around the state do account for the bulk of tax collection problems, it also could be a sign that they need help. Perhaps in the form of simplified tax laws and reporting requirements, but also in developing the management skills that can head off problems that lead a small business down the slippery slope of using tax money to keep a business afloat.

— Charlie Quimby

Mall of America deal highlights subsidy issues

A last-minute change  in the tax bill agreed to over the weekend raises anew the issue of public subsidies for private business development. The change was made to a subsidy proposal for the Mall of America's $2 billion expansion — from a provision apparently crafted specifically to include Chanhassen Dinner Theatre in the project, to language that excludes a dinner theater.

Chanhassen Dinner Theatres have operated for 40 years in downtown Chanhassen on the western fringe of the Twin Cities metro. A move to the Mall of America would provide a more centralized location and better access to tourist audiences. The Mall says the dinner theater provided a key part of the project's viability.

The private benefits are clear; the public payoff is less so.

The Mall subsidy was being sold on the basis that it would create thousands of jobs throughout the region and would eventually produce state tax revenues that would be shared with other cities. That much may be true, but it would also be true with a privately financed project.

The Mall's owners have already identified this region as the place where they want to do business.  If lenders don't want to finance the project, it's not as if Mall of America can expand in Sioux Falls. A Mall expansion, by definition, can occur only at its present location and it must make economic sense in that location.

Under the approved tax bill provision, Bloomington could levy local sales taxes on its hotels and business. Some local officials complain that the financing the public costs fall unfairly only on Bloomington. That's not technically correct, since half the Mall's sales are to out of state visitors and a large portion of the remainder are to consumers from outside the city. By taxing only Mall businesses, hotels and car rentals, the city would effectively export much of the tax burden. It's debatable whether an additional sales tax would cause many consumers and visitors to take their business outside the city.

In short, it's a bad idea to subsidize a project that has no chance of happening in any other location and needs 17 percent of the total project cost underwritten by public money to attract private capital.

The dinner theater deal raises the advisability of providing public incentives to relocate businesses within a region — the same issue that has dogged the JOBZ program. Chanhassen loses; Bloomington wins and says its victory will benefit its neighbors, too. But by what measure will we know?

Matt Kane, policy fellow for Infrastructure & Economic Development at Growth & Justice, has written extensively on the effects of tax breaks and subsidies on business location. He urges taking a broader view when considering such proposals.

From an economic standpoint, growth at one location within a regional economy drives growth for the regional economy as a whole, so tax incentives designed to draw businesses to one location in a region instead of another have little or limited impacts on overall regional growth. That being the case, tax incentives for economic development work best where they are least justified by swinging decisions from one site to another within the same region — the region the firm already has identified as the one they want for their new location.

The public sector should pursue economic development policies that result in broad benefits for residents and businesses in the region, especially benefits that will continue to have a positive impact even if specific businesses close or move. 

Reps. Joe Hoppe, R-Chaska, and Paul Kohls, R-Victoria, represent the Chanhassen area and played some role in changing the language that blocked a move by the theater. They say they acted on principle, not parochialism.

And though we might not often find ourselves siding with Hoppe and Kohls on tax matters, this is one where we agree.

— Charlie Quimby

It takes two to tangle a tax system

Last week, when Gov. Pawlenty announced his 21st Century Tax Reform Commission to reform business taxes, in Massachusetts

Governor Deval Patrick's quest to tighten corporate tax laws and reap hundreds of millions of dollars in new revenue might be undermined by a last-minute amendment providing new offshore tax breaks that was tacked onto the legislation by the House, according to state officials.

I'm not going to prejudge the outcome of the Minnesota Commission's work, but it will be interesting to see if this panel of business people will operate under any different mindset than their business lobbyists do, slipping in amendments that take money out the back door while reformers like Patrick are walking around closing the windows.

The issue hinges on a complex tax regulation called combined reporting, which is designed to prevent large, multistate corporations from shifting certain profits to other states that have lower tax rates. The House-approved corporate tax legislation would require companies in Massachusetts to combine all income and apportion the Massachusetts share.

Minnesota is gradually shifting its apportionment of corporate taxes toward a heavier weighting on sales versus property and payroll. This will benefit companies with headquarters or a major facility in Minnesota that sell products nationally or worldwide. Companies that sell in Minnesota but have relatively modest in-state operations may pay more with a sales-only formula.

Whenever there are differentials in tax rates, businesses will try to exploit them. While those favoring reduced state taxes focus on the threat of businesses leaving the state, uprooting operations carries its own costs and risks. It's usually more practical for a company to do the same thing any governor does — shift the money.

Instead of moving revenue between departments and programs, the business seeks ways to move sales and expenses to different states or countries with more favorable policies.

For example, this Wall Street Journal article described a Wal-Mart maneuver establishing an office in Florence, Italy, for the purpose of avoiding Illinois taxes.

The dispute with Wal-Mart is part of a wider effort by some states to crack down on what they believe is abusive use of so-called 80/20 companies. These companies are domestic subsidiaries that conduct at least 80% of their business overseas. States typically don't tax income from outside the U.S., and many companies have used 80/20 subsidiaries to legitimately shield foreign operations from state taxation.

The Commission's charter is to look for tax-related barriers to business investment and capital formation and for ways the business tax system can be simplified. So far, so good. But no government sets out to create a complicated tax system. It gets that way over time as individual and business taxpayers seek ways to pay less — and seek incentives that supposedly advance the public good.

Almost any change in the tax code contains potential for new mischief. If the Commission's recommendations can help state businesses without creating new losers and new loopholes, the members will have done great work indeed.

— Charlie Quimby

Dirty Little Secrets.

One of the business newsletters I receive had an article from a business broker that started out with the cliche: "Tax season is here." 

Then it got interesting.

The author talked about the importance of an owner not aggressively reducing taxes if he plans to sell the business within two years. That's because businesses typically sell for a multiple of earnings, and more dollars on the bottom line can mean a higher sales price.

[B]ut many business owners (and their CPAs) are automatically programmed to reduce taxes. Some to such a degree that not only are they reducing taxes, they are breaking the law and exposing themselves to no small degree of risk when they go through the business sales process.

It also helps your business broker / M&A advisor. I can’t tell you how frustrating it is to get turned down by banks on business acquisitions, when I KNOW the cash flow (and value) is there. But either I can’t divulge it to the bank, or I can divulge it but the bank will not accept the adjustments to the tax returns.

The year or two before you sell is the time to come clean and show all your profits. It is well worth it!

In other words: Stop cheating when you have the opportunity to make more money by being honest!

I had a mortgage banker tell me a similar story about being unable to qualify self-employed consultants for big mortgages, once they find the tax returns didn't reflect the applicants' stated incomes.

Most business people and accountants are honest, but it's also true business owners have legal ways of enjoying the fruits of their business and minimizing their tax liabilities that aren't available to wage earners.

As for the cheats, it's nice to know they might pay for their sins even if they don't pay the government.

— Charlie Quimby

Progressive taxes AND real prosperity

Groups such as Minnesota Citizens for Tax Justice have been pointing to evidence since the mid-1980s that fair and progressive taxes do not necessarily hinder economic prosperity and growth. That argument is a central tenet here at Growth & Justice, and we've been a leader making the case for a more progressive tax structure in Minnesota since our founding five years ago. We're not territorial about this distinction or this issue and we're always happy to see other groups take up the fight.   

The latest to weigh in is Minnesota 2020 fellow Jeff Van Wychen, who has also worked with us on tax-and-budget issues, in a study that correlates progressity of taxes with indicators of economic vitality and quality of life.   

In an impressively documented study, Van Wychen shows that:

States with progressive tax systems do at least as well as states with more regressive tax systems in economic performance, business climate, and general livability...Why is this?  One explanation is that states with the most progressive tax systems are better able to finance the educational and transportation infrastructure and the public services that a modern economy requires because they don't shift a disproportionate share of the burden of paying for these investments to households with the least ability to pay.  The loss of high income households due to progressive taxation is offset by an increased ability to pay for public investments.

Despite the careful and understated tack taken by Van Wychen — and a finding only of a "slight tendency'' for states with more progressive tax structures to actually perform better economically — his work drew a sharp critique from conservative Minnesota Free Market Institute Fellow Craig Westover, and a counter-reply from Van Wychen.   

Westover, as usual, poses thoughtful questions and counterpoints but without evidence implies bad faith when he dismisses the study as "little more than (an) attempt to support a partisan position,'' and of "not even trying to get it right.''   

We agree with Van Wychen that if progressive taxes (in shorthand, tax rates that are higher on higher incomes than in states with regressive tax structures) really are bad for business, that evidence should have come through on at least one of his study's six bar graphs representing rankings of states on economic vitality measures.   

Moreover, for two decades, it's conservatives who have been the aggressors on this correlation front (progressive taxation is bad for rich investors) in their relentless crusade to undo the New Deal and the progressive tax structure that created it. And finally,  even Westover acknowledges that Minnesota was near the top on every business and life quality measure.   

Despite our decline in relative tax progressivity since the big income tax cuts earlier this decade, we still rank 11th in progressivity. If any state has done it right in matching progressivity and prosperity, it's us.

— Dane Smith 

Facts don't support the growing government story

While Rep. Marty Seifert's (R-Marshall) recent remarks about scary government encroachment were made at a relatively obscure event, this kind of framing in some version has been heard for years at the state capitol. And it appears to be in the wings for a re-run nationally. 

Rep. Seifert's "pulling the wagon" imagery (a favorite of conservative firebrand Sen. Phil Gramm in his short-lived 1996 presidential campaign) occurred just four days after it was presented in one of the "Big Three" messages advocated for 2008 by the conservative Heritage Foundation. He said:

Today three of the top five employers in the state are State of Minnesota, the University of Minnesota and federal government. I don't know about you, but that is getting to be a little bit scary in terms of fewer and fewer job providers because of more and more regulations and taxes.

You folks are pulling the wagon. And everyone else is riding on the wagon.

In a previous post, I explained why we should not be scared about who Minnesota's largest employers are now. Total public-sector employment as a percent of the total workforce Minnesota has actually dropped since the early 1990s.

Yes, the state is a large employer, but private sector jobs growth — while not as good as anyone would like — is growing at a much higher rate than in the government sector. The number of job creators is also growing, not "fewer and fewer."

But even so, it might be a legitimate concern if government employment in Minnesota were growing out of proportion with other states. So I looked at some other numbers to provide that context.

I'll use Census Bureau and Minnesota Taxpayers Association (MTA) data here, because they allow easy  state-by-state comparisons. (These will not align exactly with numbers I cited in the last post, because MTA rankings use FY 2005 and the Census Bureau data uses March 2006 employment. I've chosen full-time-equivalent (FTE) positions rather than number of jobs for better state-to-state comparisons.)

I looked at government employment in Minnesota and five other states similar in population.

According to the Census Bureau in 2006, Minnesota state government employed 76,795 FTE — half of which were in higher education (35,605) and police (3,300) work. I calculated a ratio between government employees and the state population so we could compare the relative proportion of state residents working in state jobs — since that seemed to be the main beef.

Here's how they compared:

• Wisconsin .0124
• Colorado .0149
• Minnesota .0153
• Missouri .0157
• Maryland .0166
• Alabama .0185

In other words, Minnesota's proportion of state and local employment is about in the middle for similarly sized states.

According to the MTA [Minnesota Compared.pdf], Minnesota ranked 31st among states and very slightly below average in state and local expenditures per $1,000 of personal income. This is the measure of our capacity to pay for services based on the wealth generated by the state's economy. On expenditures per capita, we ranked 12th. This is a measure of cost, but also services delivered per person.

We reject the Heritage Foundation talking point that public employees are "riders" and private-sector employees are "pullers." Both sectors do work of great value for our communities. Both groups pay taxes.

And the story — that more and more people are working for government and fewer and fewer for the business sector — is based on an attitude toward government, not on the facts.   

— Charlie Quimby

What helps business growth? Smart public investment!

The question was:  "What helps or hinders growth in Minnesota?" The venue was a luncheon program in Bloomington this week at the "Grow Minnesota'' project sponsored by the Minnesota Chamber of Commerce. 

The answer, in large part, turns out to be smart public-sector investment. And those weren't our words, although we say them often enough at Growth & Justice, but the implicit and explicit response from four exemplary real-world business executives.

In introducing the four senior execs, Chamber senior vice-president Bill Blazar said the project's extensive surveys and outreach to businesses across the state revealed "over and over and over again'' that business values "the availability and training of workers in Minnesota.'' For other companies, Blazar said, increased transportation and infrastructure investment "is the biggest issue in the world.''

Blazar cited the obligatory and predictable concerns in a survey of businesses to "hold the line on taxes'' (Minnesota now ranks 23rd among the states in total taxes as a percent of income) and the perennial desire to hold down worker's comp and unemployment comp costs. But the four business leaders who followed him said hardly a word about their tax burden or regulatory concerns. And rather than casting state and local government as a problem, some of them lavished praise on the efforts, especially by local governments and redevelopment agencies, at retaining and expanding their enterprises.

Here are excerpts from all four, who also were quoted on the Star Tribune editorial page this week.

From Don Pyatt, president of Viracon Inc., a thriving Owatonna-based company that has become one of the leading architectural glass manufacturers in the nation (Freedom Tower in NYC and flashy new high-rises in Las Vegas will be clad in their product): Health-care and energy costs are the biggest hindrance to growth, Pyatt said, and his company most needs an increased supply of skilled and trained workers. His only criticism of state government had to do with not doing enough, namely that the state college system (MNSCU) had recently cut back its training program for electricians.

From James A. Sieben, vice-president and general manager of Nova-Tech Engineering LLC, in Willmar,  manufacturer of various technology for U.S. and international poultry hatcheries: Local government economic development officials had a vision for helping Nova-Tech locate its operations on the campus of an abandoned state regional treatment center. Sieben proudly showed pictures of how the state facility has been transformed into a thriving corporate campus. One little nit about government:  the local historical society has been an obstacle to the company's efforts to renovate some of the buildings on the campus.

From Jeff Strauss, director of operations for Total Card, Inc., a  Luverne company that serves credit card customers. The southwestern community leaders and the state's JOBZ program "came together'' to help the company expand in Minnesota and the company has thrived and grown in Minnesota, experiencing a dramatically lower turnover rate than in its South Dakota operation. The state could do something locally to reduce taxes for workers who are living in Iowa and South Dakota and also paying taxes there, Strauss said.

From Brett Weiss, president of WSB & Associates, a Minneapolis infrastructure engineering firm: Of the four, Weiss was perhaps the most emphatic about the damage done by "a lack of investment on our government's side,'' especially in  transportation. The failure to invest was causing state construction companies to fail and forcing developers themselves to pay for infrastructure. "It's time to do business in Minnesota,'' Weiss said.

At Growth & Justice, now a dues-paying member of the Minnesota Chamber of Commerce, we couldn't agree more.

—Dane Smith

 

Do state taxes really make the wealthy walk?

This op/ed, by Charlie Quimby and Dane Smith, appeared in the May 20, 2007 Minneapolis Star Tribune. The rich are leaving! The rich are leaving! We all heard those dire warnings trotted out to justify Gov. Tim Pawlenty's veto last week of an income tax increase on the wealthy that would have provided property tax relief. If Minnesota raises the top income tax rate, goes this refrain, wealthy citizens will flee the state, businesses will take jobs elsewhere, and entrepreneurs will be discouraged from coming here.

Seductive low-tax states like Florida, Texas and Arizona are primed to pluck more of our most prosperous retirees, like the recently departed executive Bill Cooper. South Dakota is preparing welcoming parties for our beleaguered businesses. And thanks to the veto, we were spared the spectacle of caravans of limos, Hummers and Citations streaming over our borders -- "The Grapes of Wrath,"Château-Lafite-Rothschild-style.

But is it true?

Call it tried but not true, lacking in foundation. It's a worn-out argument that has always been thrown up against a more progressive tax system. But unless you already believe that taxes are the root of all evil, it's impossible to look at the evidence and conclude that an income tax increase at the top would set off a massive millionaire migration from Minnesota.

Take businesses leaving the state. It is such a nonproblem, the Department of Employment and Economic Development doesn't even track business departures. When it did measure business outmigration, for nine years in the 1990s, Minnesotans paid higher income taxes and about 1.5 percent more of our income for government services than we do today.

If businesses were going to flee the state because of taxes, that was the time to do it. Yet during that period, only 95 manufacturers moved out of state, totaling an approximate peak employment of fewer than 5,000 workers.

Over the same nine years, Minnesota gained nearly 400,000 jobs. In 1996, when our price of government was near its all-time high, we ranked ninth among states for business expansions and 48th for business dissolutions. In other words, high-tax Minnesota offered very good conditions for business success.

A 1997 study by the conservative Center of the American Experiment identified 279 Minnesota manufacturing firms that had relocated, expanded or started business outside the state over a 27-year period. Ninety-six could not be found at the time of the study, so presumably some of the transplants did not go well. Was income tax a factor? The study doesn't answer the question directly. But more than half the companies cited moved to Wisconsin and Iowa, where income tax rates were not much different from Minnesota's.

What about small, nonmanufacturing businesses? Assistant House Minority Leader Brad Finstad, R-Comfrey, warned that the Legislature's proposal to raise the marginal tax rate on individual incomes above $226,000 "will affect 59 percent of Minnesota small-business owners and employers."

The effects will mostly be fright from overheated rhetoric. Small-business owners typically report business income as personal income. In 2004, less than 4 percent of such returns filed in Minnesota reported more than $200,000 adjusted gross income from a business. Small businesses typically rely on local connections -- their social networks, proximity to thriving companies and potential collaborators, intimate understanding of customers and ability to find good employees. How many successful owners would risk uprooting themselves from the source of their prosperity to save a few bucks on taxes?

It's true that Minnesota has a slight outflow of income due in part to migration by more prosperous retirees, but it's a negligible 3.5 cents for every dollar of income growth enjoyed by nonmovers. We know snowbirds fly south, and some of them stay. But do our higher-income tax rates drive Minnesotans out?

In 2005, Growth & Justice studied the question nationwide. We found no clear pattern of dollars flowing away from states with high income taxes to states with low or no income taxes. The reality is, people and income flow both ways, and the patterns appear relatively constant over time.

Of the top 10 gainers, the states were a mixed bag on taxes, but all featured either warm weather or mountain views. Four of the 10 highest-tax states, including Oregon, with the highest income tax rating in the nation, gained income from migration. The states that lost proportionally the most income to migration were mostly low-tax states. Separate studies by Wisconsin and Iowa also concluded that tax levels appear to have no effect on the migration patterns of seniors.

As of 2006, Minnesota still had not experienced a serious millionaire drain, ranking 15th in millionaires per 1,000 households. Five no-tax states ranked lower, and only no-tax Florida and Alaska ranked higher.

To be clear, we are ridiculing only the false claims made on behalf of successful Minnesotans. The state benefits greatly from their talents, their investment and their philanthropy, and we would not support a tax policy that did in fact drive them away.

Despite what the antitax echo chamber tells us, the world does not revolve around taxes. Life changes -- college graduation, decisions to have children, job opportunities and retirement -- are the real sparks to decisions about leaving a place. And good schools, access to health care, quality employers, functional infrastructure and a pleasant environment are reasons for staying. We are already investing less of the state's income in maintaining these underpinnings of prosperity.

If you think hanging onto a few retiring millionaires will keep Minnesota great, then there's some land in Florida you might want to buy.

Note: A related report from the Center for Budget and Policy Priorities says research casts doubt on the argument that estate taxes harm state economies.