The exodus from high tax states
Americans have always been a mobile people, and among the reasons they pick up and move is because their current locations have gotten just too expensive.
What does too expensive mean? It’s more than just the costs of gas and groceries. It’s the local tax burden, too.
As the Tax Foundation notes, people left high tax states in 2021 for more wallet-friendly climes:
…the District of Columbia’s population shrunk by 2.8 percent between April 2020 (roughly the start of the pandemic) to July 2021, New York lost 1.8 percent of its population, and Illinois, Hawaii, and California rounded out the top five jurisdictions for population loss, Idaho was gaining 3.4 percent, while Utah, Montana, Arizona, South Carolina, Delaware, Texas, Nevada, Florida, and North Carolina all saw population gains of 1 percent or more.
The picture painted by this population shift is a clear one of people leaving high-tax, high-cost states for lower-tax, lower-cost alternatives. The individual income tax is only one component of overall tax burdens, but it is often highly salient, and is illustrative here. If we include the District of Columbia, then in the top one-third of states for population growth since the start of the pandemic (April 2020 to July 2021 data), the average combined top marginal state and local income tax rate is 3.5 percent, while in the bottom third of states, it is about 7.3 percent.
There’s also the larger picture that’s developed over the last two years:
Early in 2020, it was hard to disentangle preliminary data on migration, determining what was a temporary safety-based relocation and what might be a longer-term move. With Census data through July 2021, however, and industry data for all of 2021, we now have a clearer picture of which moves were for the long haul. The pandemic has accelerated changes in the way we live and work, making it far easier for people to move—and they have. As states work to maintain their competitive advantage, they should pay attention to where people are moving, and try to understand why.
Voting with your feet: it’s still a thing, and stronger than ever.