New Hampshire House Passes Right-to-Work

The Union Leader, New Hampshire’s largest newspaper, is reporting that the New Hampshire House of Representatives has just passed a right-to-work bill 221 to 131.  Currently, 22 states have right-to-work laws and none in New England so this is huge.

Richard Vedder, the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University, has an excellent article in the CATO Journal which describes the national movement of people and economic growth toward right-to-work states (pdf).  He concludes:

“The proportion of Americans living in right-to-work states has risen noticeably over the years, and only a small part of that is driven by new states adopting such laws.  People move in extraordinary numbers to right-to-work states from states where union pressure has prevented the adoption of such laws.  Moreover, the greater flexibility for workers and employers offered where right-to-work exists has contributed to higher rates of economic growth rates in the right-to-work environment.  Although the United States seems to have been in roughly a stable political equilibrium regarding these laws in recent decades, if the past trends toward the right-to-work population growing in a relative sense persists while union membership continues to fall as a proportion of the labor force, a threshold point should be passed where the political equilibrium should tip toward making right-to-work laws universal for the entire American population.”

Additionally, my own research on migration patterns in other states has shown this very pattern of people moving from non-right-to-work states to right-to-work states.  I have done studies in four states that are all non-right-to-work and have very high union membership rates (averaged between 1995 and 2007):  Illinois (7th), Minnesota (8th), Rhode Island (9th) and Connecticut (13th).

  1. In the Illinois migration study (pdf), folks moved to where union membership averaged 42.74 percent lower than in Illinois–to 10.3 percent of the labor force from 18 percent.
  2. In the Minnesota migration study (pdf), folks moved to where union membership averaged 49.99 percent lower than in Minnesota–to 9 percent of the labor force from 18 percent.
  3. In the Rhode Island migration study (pdf), folks moved to where union membership averaged 56.73 percent lower than in Rhode Island–to 7.5 percent of the labor force from 17.3 percent.
  4. In the Connecticut migration study, folks moved to where union membership averaged 50.63 percent lower than in Connecticut–to 8.2 percent of the labor force from 16.6 percent.

I’ve also done one study on the reverse in Oklahoma which recently became a right-to-work state in 2001.  In the Oklahoma migration study, folks moved from states to Oklahoma where union membership was 83.9 percent higher than in Oklahoma–to 7.8 percent from 14.3 percent.

While New Hampshire has been a net in-migrate state for many years, the evidence is clear that New Hampshire would be an even greater destination state if it were a right-to-work state.  Unfortunately, Gov. Lynch (D) has vowed to veto any right-to-work legislation.  While Republicans hold a supermajority in the both the House and Senate, the Union Leader article stated that “a few Republicans joined Democrats in opposing the bill . . .” which means over-riding a veto will be a tough challenge.  Stay tuned for more on this important economic debate.

Taxes Matter VII: Rhode Island Taxpayers Flee State

Yesterday the Ocean State Policy Research Institute released my study on the migration of people and income out of Rhode Island: “Leaving Rhode Island: Policy Lessons from Rhode Island’s Exodus of People and Money.” (pdf) Here is the excellent cover art followed by the Press Release.

Cover Art for Leaving Rhode Island Migration Study

The Ocean State Policy Research Institute (OSPRI) released today its “Leaving Rhode Island” study, documenting the people and wealth that are leaving the state due to out-migration.

A Press Conference will be held today (January 20), at 2:00 pm at the RI State House Rotunda, to discuss the study. Speakers will include Alan Hassenfeld; Bill Felkner, J. Scott Moody (Fellow on Economic Policy), and Mike Stenhouse.

The study, which is based on actual figures from IRS and US Census data, and which can be downloaded from the OSPRI website at, paints a grim picture of how Rhode Island’s oppressive tax structure is driving both human and capital resources out of the state. Among the specific findings:

  • Rhodes Island lost a net of 107,086 residents to other states between 1991 and 2009, or about one in ten current residents.
  • Between 1995 and 2007, total net income (in-migration minus out-migration) leaving the state averaged $78,468,000 every year translating into a total loss of over $1 billion.
  • If the annual income loss is compounded over the thirteen years examined in this study, the state has cumulatively lost $4.6 billion.
  • Had this income stayed in Rhode Island, an additional $540 million would have been collected in state and local taxes.
  • Of the seven variables examined, the Estate Tax is the most influential to where people and wealth migrate.

“Virtually all of my wealthy friends and fellow philanthropists have moved their residencies out of RI,” said Alan Hassenfeld, whose Hassenfeld Family Initiatives foundation commissioned the OSPRI study. “This loss of income to our state’s economy, to our tax revenue base, and for local charitable-giving is a LOSE-LOSE situation for everyone involved. Unless there is a drastic change in the punitive estate tax here in Rhode Island, anyone in my position would be a fool not to leave.”

“If our Rhode Island economy is to ever reach its full potential, we must stop the hemorrhaging of people and wealth”, said Bill Felkner, OSPRI founder and Director of Policy. “We hope that the General Assembly seriously considers these findings and that they can find a way to reverse this trend.”

According to the OSPRI study, Rhode Islanders are fleeing to states where the average tax burden is 14% lower. The Estate Tax, however, is the primary driver of the out-migration of wealth.

“The estate tax is one of the most counter-productive taxes in our state’s tax code”, continued Felkner. “Small and family businesses are often forced to dissolve and many  prudent high-net-worth individuals will simply leave Rhode Island to avoid the ‘death tax’.”

John M. Harpootian, a principal in the law firm of Paster & Harpootian, Ltd. who limits his practice to estate planning, stated that “It is a common practice to advise Rhode Island residents that a change of domicile can save significant estate tax … . During just the last 5 years, our office has seen nearly 100 of some of the wealthiest Rhode Island residents change their domicile to avoid paying RI estate taxes at their deaths.”

On January 14, OSPRI conducted a briefing for legislators who were interested in learning more about the study’s findings. Attending the briefing, conducted by Scott Moody and Bill Felkner, were Senators Kettle, Maher, Pinga, O’Neil, Ottiano, and Shibley along with Representatives Chippendale and Gordon. Also attending the briefing was Gary Sasse, former Director of Administration and former RIPEC Executive Director, who supported the study’s findings in stating that “RI’s Estate Tax has a negative impact on the State’s ability to maintain wealth and thus enhance investments. We must develop and implement a tax reform strategy to address this if we are going to going to improve our economic competitiveness.”

“OSPRI will continue to provide vital research about the critical issues we face in our state”, said Stenhouse (OSPRI Executive Director). “Out-migration is a serious problem for RI. Without an honest debate about the actual consequences of our public policy, we will continue to chase our tail.”

Taxes Matter V: Illinois Taxpayers Flee State

Today the Illinois Policy Institute released my study on the migration of people and income out of Illinois: “Leaving Illinois: An Exodus of People and Money.” (pdf)  Here is the Executive Summary:

Migration between the U.S. states is the ultimate expression of “voting with your feet.” People move for many reasons, but, when examined en masse, it’s clear that public policy significantly influences where people choose to live. This study undertakes a thorough examination of Illinois’s migration patterns to better understand progress on important public policy issues. Key findings include:

  • Illinois lost a net of 1,227,347 residents to other states between 1991 and 2009, or slightly more than one resident (1.22) every 10 minutes.
  • The top states that people from Illinois move to are Florida, Indiana, Wisconsin, Arizona and Texas.
  • Illinois lost 86,021 taxpayers between 1995-2007 to its border states: Wisconsin, Indiana, Iowa, Missouri and Kentucky. This represents $4.1 billion in lost Adjusted Gross Income (AGI) and $26.8 billion in cumulative AGI loss.
  • Illinois lost people and taxpayers to 40 states and the District of Columbia, and Illinois lost net income to 42 states and the District of Columbia.
  • The total net income leaving the state averaged over $1.8 billion between 1995 and 2007 with a total loss of $23.5 billion. Had this income stayed in Illinois, state and local governments would have collected an estimated $2.4 billion in additional tax revenue.
  • When a resident moves out of Illinois, the state doesn’t just lose income and taxes for that one year; rather, the state loses any income and taxes that resident would have generated for all future years. Compounding these figures over the 13 years assessed in this study – without adjusting for inflation – the state has lost $163.6 billion in net income and $16.9 billion in state and local tax revenue due to out-migration.
  • People move from Illinois to states with lower taxes (especially estate taxes), lower union membership, lower population density, lower housing costs and warmer weather.
  • The most significant driver of out-migration, on a percentage basis, is the estate tax. This is especially important considering that the number one destination state for former Illinois residents is Florida, a state with no estate tax (or individual income tax).

Conclusion: Without action, out-migration will continue to reduce the ability of both the private and public sectors to ensure Illinois’s economy becomes strong and vibrant.

In breaking news, the Wall Street Journal reports that Illinois Legislature just passed an enormous tax hike raising the individual income tax rate from 3 percent to 5 percent and the corporate income tax rate from 4.8 percent o 7 percent.  If you think the exodus from Illinois was bad in the past, this tax hike is going to send the exodus into over-drive . . . especially the out-migration of income which is more mobile than people.

Update: The Tax Foundation weighs in as well on the Illinois tax hike . . . in their State Business Tax Climate Index Illinois falls from 23rd to 36th, that’s quite a fall.