New Hampshire is 9th Happiest in the Country

A recent Gallup survey found that New Hampshire is the 9th happiest in the country.  New Hampshire also tops the list for New England followed by Vermont (No. 12), Massachusetts (No. 13), Connecticut (No. 20), Maine (No. 25) and Rhode Island (No. 30).  Of course, New Hampshire’s low 5.2 percent unemployment rate (as of July, 2011) might have something to do with it.

New Hampshire’s Lack of Income Tax Good for In-Migration

A new study by Antony Davies and John Pulito, from the Mercatus Center, find that tax rates do influence the migration of people across state and county lines (pdf). They found that:

This paper explores the relationship between high-income tax rates and the interstate migration of high-income households. Controlling for property-tax rates, sales-tax rates, high-income tax brackets, unemployment, and state/county specific and time-specific effects, we find that higher state income-tax rates cause a net out-migration not only of higher-income residents, but of residents in general. We also find that changes in the income levels to which the tax rates apply similarly affect out-migration. For county-level data, we find that high-income households react to a lowering of income levels to which higher tax rates apply in the same way that they react to increases in the tax rates themselves. This behavior suggests that the tendency to lower the threshold for “high income” or “millionaire” households to capture households and flee to more tax-friendly environs. Finally, for state-level data, we find that the effect of property taxes on migration is significantly stronger than the effect of high-income tax rates on migration. For example, a one percentage point increase in the property-tax differential between two states has almost three times the effect on migration as does a one percentage point increase in the difference in high-income tax rates. All of these data suggest a recipe for population depletion. States lose households to more tax-friendly states by (1) lowering the “high-income” threshold so as to capture more households, (2) increasing high-income tax rates, and (3) increasing property-tax rates.

So New Hampshire’s lack of income tax is a significant driver of the influx of migrants into the state in the past few decades. However, the study indicates that New Hampshire’s relatively high property tax burden may be offsetting some of the benefits of not having an income tax.

However, the study does not examine the migration effects on states with no income tax (or no sales tax), so it is impossible to say exactly how much of the net benefit is eroded by the property tax. Also, a high state-wide average property tax burden does not, obviously, mean that all towns have a high property tax burden. In fact, there are some towns in New Hampshire that are America’s last remaining “Tax Havens” with extremely low or no local property taxes.

Americans for Prosperity NH Legislative Score Card

Check out the recently released Legislative Score Card by the New Hampshire chapter of Americans for Prosperity.  I’ve been perusing it and I can say it is very informative . . . if somewhat disturbing when you discover Legislators saying one thing but voting another.