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Hefty: State of Wisconsin still a welfare magnet
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FRI., NOV 28, 2008 - 5:26 PM
Hefty: State of Wisconsin still a welfare magnet
By Tom Hefty

The November election is behind us. But there is another election occurring every day -- people choosing to either leave or move to Wisconsin. A Nobel Prize-winning economist calls migration decisions "voting with your feet." And Princeton University reported the results in a September 2008 report.

According to the report, Wisconsin is losing that election.

Wisconsin had one of the five worst migration patterns in the United States from 2000 to 2006. Higher income individuals left Wisconsin. Individuals on the lowest rung of the economic ladder migrated to Wisconsin.

The Princeton report concludes simply, "Wisconsin is more attractive to low income individuals than high wage earners."

That migration impacts the financial, the social and the human capital of Wisconsin. But what is the impact on tax revenues? What is the cost to the taxpayers for services to the new residents?

These are questions that deserve immediate study. In the spirit of the Wisconsin Idea, UW researchers, the legislative council and the independent think tanks should be addressing these questions.

What might explain these migration trends? The brain drain of college graduates is well known. Also well studied is the loss of wealthy retirees to lower tax environments. And Gov. Jim Doyle and the Legislature have taken action to retain higher income groups by repealing the estate tax and by eliminating the jobs penalty in the formula for corporate taxation. But both trends still should concern state policymakers.

The surprise in the Princeton report was the attraction of low income individuals to Wisconsin -- perhaps a new welfare migration.

The New York Times first chronicled the welfare migration from Chicago to Madison in 1995. Wasn't Wisconsin's pioneering welfare reform intended to stop that trend?

A report presented at a 2008 Federal Reserve Conference on the Midwest economy sheds some light on the issue.

According to that presentation, Wisconsin has the highest welfare benefits in the Midwest. Welfare reform imposed time limits on benefits and introduced work requirements. But Wisconsin retained its generous benefit levels. They are nearly 10 percent higher than in Minnesota and almost 30 percent higher than in Illinois.

And Wisconsin has other benefits for low income individuals.

Although state comparisons are difficult to make, the Brookings Institute reports that Wisconsin has one of the most generous state earned income tax credit programs in the United States. Although described as a tax credit, the state refundable EITC is simply another payment to low income workers.

Combined with the broad scope of Badgercare, extensive child care benefits, initiatives for low income housing, and taxi services to school and health visits -- the pattern of attraction to low income individuals becomes clearer. And these are costs to Wisconsin taxpayers.

Some migration is driven by economic growth and opportunity. But that does not seem to explain Wisconsin's trend in attracting low income migrants from other states.

Wisconsin has been lagging the national average in job growth. And Wisconsin per capita income continues to decline in comparison to the national average.

People vote for politicians as a package of political party, values, and campaign promises. Similarly, people select their state and community of residence as a package of job opportunities, government services, taxes, cost of living, crime, schools, and overall quality of life.

"Voting with your feet" is an important benchmark for Wisconsin policymakers facing a $5 billion deficit. What will be cut? Will taxes be raised? Who will come? Who will go?

A simple comparison of national rankings is thought provoking: Wisconsin is No. 1 in welfare benefits, but 29th in spending on four-year colleges and near the bottom in spending on economic development.

Hefty is the retired CEO of Blue Cross Blue Shield and past chairman of Competitive Wisconsin. He was co-chair of Gov. Jim Doyle's Economic Growth Council from 2003-2005 and served as the interim county executive of Waukesha County in 2005.


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