Michigan’s chief growth officer said taxes don’t have much to do with state population growth during a MIRS Monday Podcast episode yesterday. “What I can tell you from the data so far is that there isn’t much correlation [between taxes and population growth],” Hilary Doe told the interviewer.
But there is, in fact, a correlation between taxes and population growth. Low-tax states increase their populations more than high-tax states.
The relationship can be seen in the graph below. It compares each state’s population growth since 2019 against its score on the Tax Foundation’s State Business Tax Climate Index. The Tax Foundation gives states credit for having taxes with broad bases and low rates. Its index includes ratings for all the major taxes a state levies, not just business taxes.
States that have low taxes score high on the index and appear on the right side of the chart. States with high population growth appear on the upper part of the chart. Notice that states are clustered around a trend that goes up and to the right, meaning that states with lower taxes tend to grow their populations more.
States with low taxes add more people than states with high taxes.
Doe argues instead that states with more educated populations increase their populations faster. This is incorrect. States that have more college graduates tend not to grow more than states with fewer college graduates, as the next chart shows. Take for example the vertical line that represents states in which 30% of the population has a degree. Some states grew by 4%, some barely grew, and some lost population.
Michigan lawmakers ought to wonder whether the chief growth officer and the state’s population growth council are taking a data-driven approach to their work.
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