The Continuing Exodus from Blue State

July 6, 2024 by Dan Mitchell @ International Liberty

Most people don’t appreciate the importance of trend lines in public policy.

• A country with just a little bit more growth each year will become significantly richer in the long run.
• A modest change in annual spending growth can make a big difference in long-run fiscal outcomes.

The same principle is true in migration. If a state attracts more people than its neighbors, it’s population (and political influence) will expand.

And if a state happens to attract high-income people, the economic benefits will be disproportionately large.

And this is what’s been happening in the United States. Over time, successful people are escaping high-tax states and moving to low-tax states.

When these people move, their income moves with them. And this chart shows that the cumulative impact can be very large.

Notice, by the way, that most of the states gaining taxable income (all but South Carolina) don’t have state income taxes.

By contrast, the states losing taxable income consistently rank very low when measuring fiscal policy.

The chart comes from the Wall Street Journal, which opined about this trend based on some new IRS data.

The pandemic lockdowns accelerated flight from Democratic-run states with onerous taxes and a high cost of living. The latest data from the Internal Revenue Service shows that the exodus has continued after life got back to quasi-normal. …California ranked, again, as the biggest income loser ($23.8 billion) in 2022, followed by New York ($14.2 billion), Illinois ($9.8 billion), New Jersey ($5.3 billion) and Massachusetts ($3.9 billion). The top gainers were Florida ($36 billion), Texas ($10.1 billion), South Carolina ($4.8 billion), Tennessee ($4.7 billion) and North Carolina ($4.6 billion). …the flight from progressive states far surpassed pre-pandemic levels.

California lost nearly three times as much income in 2022 to other states as it did in 2019. New Jersey’s net income loss hit a record in 2022… If Americans living in incorrigibly progressive states want change, they will have to vote with their feet and wallets.

What’s the moral of the story?

The geese with the golden eggs can fly away when they’re mistreated.

And that’s very bad news for certain states. It may even be a recipe for eventual bankruptcy.