The Things We Know That Just Aren’t So…

Michael Hicks is an economist on the faculty of Ball State University. He recently published two columns in the Indianapolis Star that deserve widespread attention.

Hicks documents two inconvenient facts: more people move into high-tax areas than into low-tax precincts, and economic conditions in Blue cities and states are significantly better than conditions in Red parts of the country.

Hicks makes that first assertion in a column discussing the repeated mantra of candidates for Indiana’s legislature--elect me and I’ll cut property taxes! High property taxes are why Indiana keeps losing population! He points out that–despite the popularity of these proposals, property tax cuts would be highly unlikely to grow population, employment, GDP or household incomes. The data shows that population growth tends to cluster in high-tax places.

In Indiana, the 10 counties with the highest effective property tax rates alone accounted for 27,105 new residents since 2020, a whopping 61.3% of the state’s entire population growth. The 10 counties with the lowest effective property tax rates saw only 878 new residents, or less than 2% of the state’s growth.

I know many readers will recoil at this challenge to a long-held notion that lower taxes cause growth. However, it is a cold, hard fact that both population and employment growth is positively correlated with tax rates on income and property.

In Indiana, a 1% increase in the average tax rate leads to a 2% increase in population growth. That is simple mathematics.

Why would that be? As Hicks concedes, no one looks at tax rates and says “Let’s move to where taxes are higher.” What they do look at are indicators of quality of life–public services and amenities that will be available to them.

These are places where families judge themselves better off. If you live in a state where families are moving from low- to high-tax regions, your state is underinvesting in local amenities such as schools, parks, and public safety.

That reality–anathema as it is to those who view all taxation as evil–goes a long way toward explaining another phenomenon Hicks has discussed–the difference between the economic performance of Red and Blue areas of the country.

Nationwide, it is unambiguously clear that the U.S. economy is performing historically well. On every important measure — employment, wages, GDP, or wealth — the overall economy is not just performing at record levels, but also outperforming the rest of the world.

Robust national economic performance has benefits for every county and small town, but that does not mean every place shares equally in economic growth. There are plenty of places that continue to do poorly.

And the gap between them is growing. Rich places are, for the most part, getting richer and poor places poorer–in contrast to what has typically happened before. Moreover,

poor places are increasingly governed by Republicans and rich places by Democrats. The gap between rich and poor places might help explain the partisan differences in perceptions of the economy.

The regional differences are compelling across dimensions of rural and urban places, as well as between cities and rural areas.

18 Comments

  1. I don’t know much about Indiana And it’s political leanings. But I do know, that there are states, one is Illinois, that’s considered a donor state. And there are other states, especially those in the south, that are called welfare states because they receive so much assistance from the federal government. This is possible by the donor States, and the taxpayers in the donor States have an undue burden trying to finance the tax cut rhetoric of the welfare states politicians and governments.

    Those who belong to the welfare states have politicians who decry assisting the poor for the most part. But their governments have their hands out asking for funding concerning projects that make them look good to their constituency while they continue to demonize their donor neighbors and the donor fed, which redistributes it’s tax income to backfill gaps in the welfare states.

    The hypocrisy of what they roial against, as they take credit for what is provided by all of those donors out there who pay the higher taxes, is mind-bogglingly astounding.

    Being a bunch of lemmings which would follow their leaders right off the precipice, as a result of ignorance, lack of historical knowledge, and warped religious beliefs, happens over and over again!

    It’s only going to get worse. The straw that breaks the camel’s back is coming into view rapidly. There’s going to be a lot of misery as society collapses into the next plague infested dark age. This time, humanity might not have a helping hand to get out of the mess that they have squarely put themselves in. History is the best truth teller, it explains exactly how things will play out. Because the human race simply cannot learn its lessons and would rather live in misery unnecessarily. Germany is an abject lesson among many that shows how the population of a country can follow the leader right off the cliff! Keep a population ignorant enough, they’re susceptible to anything and everything whispered in their ears.

  2. Hicks piece on taxes isn’t the first time I have read that low taxes don’t attract people. It’s the first time I’ve seen it boiled down to what that means for Indiana. People aren’t stupid and many of them realize you get what you pay for.

    As for education, Ohio is Red State but is out spending Indiana on higher education to the tune of billions of dollars. That has been pointed out as Ohio competes and often lands blockbuster economic development projects.

  3. I sure would like to see that mythical “Blue Wave” pass through here and wash away the stain of MAGA.
    Hope springs eternal! Get Out the Vote!

  4. Here in NC the state is at a cross roads, the growth here driven by NE retirees moving in is latterly out of control, the state and counties infrastructures is not keeping up with population growth.
    The Republican candadate Mark Robinson for Governor and now Lt. Governor is one scary SOB.
    Loudly saying weekly that there are many citizens in NC than “need killing”
    that Women who get abortions should be put to death for murder, that Medicare and SS is a welfare program
    And Trump endorsed him. All of this coming from a “Trumpeter in Black Face” who seems to have no compassion for anyone except himself and DJT.
    Watch this race closely to see how the south will trend in here NC.

  5. I would love to ask the red state pols to define quality of life. Down here, in sunny Florida, our governor has just vetoed all state funding for the arts. Makes zero sense to me.

  6. Everything Republicans do and propose is designed for only one thing: WINNING ELECTIONS to stay/get in power. Why? Because they have their donors/sponsors to please and pay back. Republicans will do and say ANYTHING to achieve those goals. That’s why none of what they say and do makes any sense to rational people. Their voters are, sadly, in the cult of Republicanism and would rather sell their mothers into slavery than vote for a Democrat – for ANY reason, including their own benefit.

    Go figure that puzzle …

  7. For those interested, “A Fever in the Heartland” by Timothy Egan recounts the takeover of Indiana by the Klan. The subtitle is “The Ku Kluk Klan’s Plot to Take Over America, and the Woman Who Stopped Them”.
    Drawing on the work of historians as well as the extensive collections of documentation in the Indiana Historical Society, The Indiana State Library and archives held at the University of Notre Dame and Ball State, he covers the rise of D.C. Stephenson and the Klan in Indiana during the 1920s.
    The parallels to the rise of White Christian Nationalism, not only in Indiana but throughout the country are almost identical in their manipulation of the media, the undermining of government, judiciary, law enforcement at all levels and religious leaders, most especially evangelicals and hard line Christians of all stripes, using bribery and intimidation.
    A compelling narrative centered in Indianapolis almost exactly 100 year ago, it is enlightening and frightening to realize how many people are so easily led to hate and grievance against the “other”.
    Interesting to note that commentary about why rural communities were so easily co-opted pointed to the boredom and isolation of rural residents who saw the Klan as bringing exciting events, the comfort of unity in purpose, no matter how hate-filled, and perceived righteousness of cause.
    They wanted to close the borders to immigrants, build a wall, cleanse the academy, buy universities (Valpo was top of the list). Sound familiar?

  8. It’s nice to hear Hicks not spout Koch and ALEC lies anymore. Ball State’s business and economic departments are infested with Koch shills and Indiana Policy Review advocates. Not to mention, Ball State’s BOT are all far-right advocates. The school bought out all tenured faculty and placed a gag order on them. There was no buyout if the employees didn’t accept the gag order.

    With that said, our local taxes surrounding Ball State have gone through the roof because our top employers don’t pay any taxes. While they don’t pay taxes, they do cause our property values to increase, which should mean more people moving into Muncie, according to Hicks’ article—quite the contrary. Folks with fixed incomes cannot pay taxes, and their homes end in tax sales. These UniverCities are causing forced gentrification all around the country.

    All of us in Indiana know where the high-taxed growing counties/cities are located–the donut ring around Indy mostly. Do they grow because they are highly taxed areas with lots of amenities or because they are suburbs surrounding a metropolis with a high percentage of minorities and violence?

    Lots of variables to consider. I do agree that young people are flocking to the Blue States. This has been happening for decades. The Lilly Foundation gives money to study the “brain drain” in Indiana, but we rarely hear the outcomes of those studies. I wonder why? LOL

    I searched for Indiana’s brain drain, and the last article was in 2023 by the Indy Star, and then it goes back almost a decade. Hicks was quoted in that article saying precisely the same thing as his current article. The journalist said, “Fiddling while Rome burns, the legislature also discussed and passed socially conservative bills that progressives oppose.”

    See ya later! You can almost hear the sucking sound over Indiana late at night.

  9. Fascinating!
    Hicks’ point is well made, people do not run to take advantage of higher taxed areas, for the sake of the taxes. But, those taxes support a better life style.
    Ray, it is, indeed, amazing that Robinson can spout all that garbage, and still be taken seriously, but he’s in one of the Carolinas.
    Peggy, as a “neighbor” here in Florididia, I have read, and agree with the idea, that DeStupid wants no money going to a field of endeavor that encourages “out of the box,” even radical, or “woke” ideas. If one is “Free” to think other than how he thinks, one is a bad, barely human person.

  10. Looking on from the UK – and worrying as we have US family.
    Is anyone over there aware of the recent elections in France and the UK? In the case of France, the Right was kept at bay by a last minute united effort by a conglomeration of Left leaning parties. In the UK the Left has swept the Right under the table (although there are still major threats) again done by uniting under one banner. A lesson for US Democrats? Stop squabbling and unite behind one leader (if necessary removing Biden)!

  11. Hi Ellie,

    I’ve been watching the elections and thought Le Pen would win. Salute to the French voters for their last-ditch efforts.

    I don’t know about France’s Leftists, but I am familiar with the UK’s Labour Party, which resembles the US’s Democratic Party, which is not Leftist. It will be interesting to see how Keir Starmer’s decision-making differs from the Tories.

    Europe is ahead of us in their progressive policies by years. I’m not sure the Democrats will have the same luck as Europe, but we shall see.

  12. Those who companies wish to relocate give us a statistic unknown but one I have guessed to be important from my own experience. My first criterion was the presence of libaries, closely followed by good school reputation. I don’t remember any consideration of tax rate on the assumption that those who lived there would have long since vacated the premises if the rates were confiscatory and not what such rates are in favor of what one gets for his/her money. A Hyandai is not a Bentley. By such measurement a high tax jurisdiction may be the cheaper as measured by outcome.

  13. Wow! Hicks used to have extreme right-wing views. It appears he has finally opened his eyes and recognizes the economic destruction caused by republican legislatures.

    Indiana’s right wing legislators are spouting off about eliminating our state income tax because that is what the corporate members of ALEC want. During the past few years they managed to change our property tax formula to greatly reduce property taxes on corporations and businesses. They accomplished that by vastly increasing property taxes on residential property.

    Those that enjoy great wealth will not be happy until ALL taxes are paid by the rest of us who cannot afford to line the pockets of our legislators to ensure they stay employed.

  14. There are a few things that those of us who rely on measurement of reality all agree are true:

    1) Wealth and knowledge are both inequitably and dysfunctionally distributed here.

    2) The current Fed’s economic recovery from the Covid collapse has become a masterpiece.

    3) Those who depend on their labor for sustenance still haven’t seen wages keep up with their cost of living.

    4) It is true that in politics, “it’s the economy, stupid.”

    This is excellent news for those with wealth, power, and influence but not so for those on the low economic end of the spectrum, many of whom we depend on.

    Whoever the DNC decides our Presidential candidate will be this year needs to campaign heavily on solutions to those facts rather than defending them.

  15. I just hope that the Dems don’t just roll over and die and let the Republicans plow through. In 1982, when my Mom was still a Republican and southern Indiana was still democrat, she took 49% of the vote in a state rep district where no Republican had pulled more than 30% in decades. She did it by either her or me or one of our friends knocking on ever door in the district. That is the way JD Ford won. I get frustrated that the Dems except JD Ford in my district are so hands off.

  16. John Sorg – Indiana is one of the states that receives more tax revenue from the federal government than we pay. We are basically taking money from blue state residents.

    If the federal formula for revenue distribution would be changed to a fair formula that distributes funds back to each state an equal percent of what they actually paid in federal income taxes the red states would rapidly implode.

  17. I’ve followed Hicks for years and he’s consistently conveyed this message. The data shows that the younger and more highly educated want amenities which enhance their lives and are willing to pay higher taxes. Top schools for their children, security, and amenities.

    I did a quick lookup of property taxes paid in Indiana and two specific counties, Hamilton (Carmel, Fishers, etc) which is rapidly growing in population and Delaware (Muncie) which is declining in population. The median property tax paid in Indiana was $1,051, in Hamilton $2,274 and in Delaware $959. Overall, Indiana’s property taxes are relatively low in relation to other states.

  18. Nancy,

    Absolutely they would! Then they would have to answer to their constituency and explain why all of their entitlements disappeared. Or at least many of them. Every time I turn around, the taxes go up every year unlike my social security or retirement pension. Property taxes have tripled in 4 years, a lot of it is because of the school voucher program! The schools are responsible for about 80% of our local taxes. That absolutely is not sustainable. I wish there was a panacea in this country somewhere, cuz that’s exactly where I would be, lol! Unfortunately I’ve got my ‘pan and I’ll see ya’ at the tannery PeePee exchange! That’s the only panacea I’m aware of, in a historical sense.

    I just find it hilarious how all of the so-called patriots love how they’re representatives and leaders dip into other folks’ pockets, and then whine and moan about them paying taxes! Hypocrisy doesn’t even touch on that portion of historical insanity by those Christian soldiers.

    The apostle Paul implored Christians to pay their taxes, to give tribute to those who demand it, to give honor to those who demand it, and to go that extra mile. Which is actually in Romans the 13th chapter. The clergy tries to claim that Romans the 13th chapter is talking about the church, which it’s absolutely not. Even someone with a modicum of comprehension skills could see that. That’s why they keep them stupid! Somehow Christians today didn’t get the memo. Well they’ve seen the memo, they just ignore it. So they can’t really be called Christian anyway. The apostle Paul who wrote Romans, pointed out that very thing in the 13th chapter. Actually the whole book of Romans is good concerning what’s happening today, it’s a long book, but it’s quite interesting. Every time I read it I glean something new. That is if you’re willing to do it. Most people hate the Bible anyway.

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