The Continuing Story of Tax Migration

June 14, 2021 by Dan Mitchell

The bad news is that federalism has declined in the United States as politicians in Washington have expanded the size and scope of the national government. The good news is that some federalism still exists and this means Americans have some ability to choose the type of government they prefer by “voting with their feet.”

1. They can choose states that tax a lot and spend a lot.
2. They can choose states with lower fiscal burdens.

You won’t be surprised to learn that people generally prefer option #2. Researchers have found a significant correlation between state fiscal policy and migration patterns. And it’s still happening.  In a column for the Wall Street Journal a few days ago, Allysia Finley and Kate LaVoie discuss some research based on IRS data about taxpayer migration patterns.

Here’s some of what they wrote.

New IRS data compiled by research outfit Wirepoints illustrate the flight from high- to low-tax states. …Retirees in the Midwest and Northeast are flocking to sunnier climes. But notably, states with no income tax (Florida, Nevada, Tennessee and Wyoming) made up four of the 10 states with the largest income gains. On the other hand, five of the 10 states with the greatest income losses (NY, Connecticut, New Jersey, Minnesota, California) ranked among the top 10 states with the highest top marginal income tax rates. …Florida gained a whopping $17.7 billion in AGI including $3.4 billion from New York, $1.2 billion from California, $1.9 billion from Illinois, $1.7 billion from New Jersey and $1 billion from Connecticut. California, on the other hand, lost $8.8 billion including $1.6 billion to Texas, $1.5 billion to Nevada, $1.2 billion to Arizona and $700 million to Washington.

Here’s a very informative visual, showing the share of income that either left a state (top half of the chart) or entered a state (bottom half of the chart)..........To Read More.....