Tuesday, December 04, 2012

Ohio is a shrinking state

You probably knew this based upon our loss of two congressional seats, but maybe you didn't realize it - and what it means.

ResidencyHQ tracks migratory patterns through their residency product data and their recent article at the Financial Times details the five states residents are fleeing. Ohio is #5 in the countdown with New Jersey, California, New York and Illinois rounding out the list.

The Buckeye State is one of the few around that actually has a balanced budget. One of the reasons is because they tax their residents so well. The interesting part about Ohio though, is that a constant stream has always existed out of the state. Some of the migration is probably due to weather, but they also have very strict well-defined rules surrounding residency. Ohio’s Bright-Line Test names the specific number of days over, under, and in between that dictate someone as resident, non-resident, or other (the burden of proof is on the resident in question for ‘other’). These rules make it simple for an Ohioan to decide whether to stay put or make a run for it.

Why should you care, other than the general image this has for our state?

Cities and states always have an ebb and flow in population, but if you are in a state with a decreasing population it could impact you in the way of higher taxes (to make up for lost revenues), a less healthy economy (less people to buy stuff), and possibly less pay in your pocket (as a result of shrinking business revenues). This ‘sucking effect’ of residents flowing out of the state can be a self-fulfilling feedback loop that decimates a region. The analogy of rats jumping off a sinking ship might come to mind.

We definitely experience this in Toledo with local politicians always asking for more while telling us there's nothing left to cut. It's a double whammy when it's happening state-wide as well.

On a side note, I came across this article on countries with no income taxes. I'm not saying I'd want to live in the Middle East, but an island like Bermuda, in The Bahamas, in the Caribbean or even Vanuatu might be nice. I'd rule out the Maldives regardless of how beautiful because there are pirates in that part of the world.

The problem is that in a global society, we're not limited to where we live and that is a factor too many politicians and taxing authorities fail to consider. Yes, there are other important things to consider in terms of where you live (type of government, access to health care - especially if you're older, general freedom), but if those other criteria are equal, or nearly so, taxation ends up as the deciding factor.

And sadly for the people making the tax decisions, those who choose to pick up and leave aren't going to call the taxers and tell them about it ahead of time. They're just going to go leaving the politicians scratching their heads wondering what's going on.

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