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Friday, December 07, 2012

IRS Poised To End Widely-Used Tax Migration Analysis Program

Economic metric used for 20 years cancelled pending further review

The Internal Revenue Service announced today that one of the best metrics available to determine the economic growth or decline of every county and state in the nation will end. Unofficially, the IRS Statistics of Income Division attributes the decision to cancel the program, which dates back to 1991, to coordination issues with the U.S. Census Bureau.  There is no official word yet on why the program was cancelled.

Jim Pettit, an independent public policy analyst, who used the tax data to define trends in Maryland's overall tax base and its 24 jurisdictions and counties, regrets the decision.

"The IRS tax migration data is the best indicator we have of how state and local governments are doing in developing their tax base," said Pettit. "If there is no effective way to monitor changes in the tax base in the context of macro-economic trends, then state and local governments are at a severe disadvantage in making key legislative, regulatory and fiscal policies that address the challenges of funding government budgets."

According to the IRS, the mobility of Americans has long been a subject of interest. One of the few sources of area-to-area migration data in the United States is the Statistics of Income Division of the IRS, which maintains address records of all individual income tax forms filed each year.

Change Maryland reported IRS tax migration findings in July, determining that Maryland accounted for the largest taxpayer migration exodus of any state in the region between 2007 and 2010, with a net migration resulting in nearly 31,000 residents having left the state.  The report also identified Maryland's key competitor in attracting taxpayers.
Virginia is now home to 11,455 former Marylanders, taking $390 million in taxable incomes during this three-year period. Following Virginia, Marylanders opted for North Carolina.

Nationally, Maryland did not fair much better. Maryland joins high-taxed, rust belt states including New York, California, Michigan, Illinois, Ohio and New Jersey among states with the largest mass exodus between 2007 and 2010. Maryland saw the seventh-highest negative net migration after these states. In all, Maryland lost $1.7 billion in taxable incomes during this three year period.

The report's findings prompted a political attack of Change Maryland and it's founder Larry Hogan by the O'Malley Administration in merely reporting the data.  The Administration response attempted to frame the debate as a class warfare issue where none existed.

"A growing tax base is the ultimate win/win situation in public policy," said Change Maryland Chairman Larry Hogan upon the release of the July report.  "It eases the pressure to raise revenues, and conversely, a shrinking tax base often leads to a troublesome tax-and-spend downward spiral as actual revenues fail to meet estimates."

Many other organizations have reported the IRS data in recent years including a variety of think tanks, most notably the Tax Foundation and media outlets such as Forbes.

The IRS encourages interested parties to submit any letters of concern about this decision to them at sis@irs.gov and they will funnel comments up through the appropriate channels for review.


IRS tax data:
http://www.irs.gov/uac/SOI-Tax-Stats-State-to-State-Migration-Database-Files

Change Maryland report:
http://www.changemaryland.org/wp-content/uploads/2012/07/StateCountyTax.pdf
  

Governor O'Malley's attack:

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