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Archive for January 9th, 2020

People underestimate the importance of modest long-run trends.

  • A small boost in economic growth, if sustained, can have a major effect on long-run living standards.
  • A small shift in the growth of government spending, over time, can determine a nation’s fiscal viability.
  • A small change in birthrates, in the long run, has a huge impact on a country’s population and finances.

Another example is state-level migration.

This is occurring for many reasons, including demographics and weather.

But it’s also happening because many people are moving so they can benefit from the better opportunities that exist in lower-tax states.

The Tax Foundation has an article on interstate migration based on data from United van Lines.

States compete with each other in a variety of ways, including attracting (and retaining) residents. Sustained periods of inbound migration lead to greater economic output and growth. Prolonged periods of net outbound migration, however, can strain state coffers… While it is difficult to measure the extent to which tax considerations factor into individuals’ moving decisions, there is no doubt that taxes are important in many individuals’ personal financial deliberations. Our State Business Tax Climate Index uses over 100 variables to evaluate states on the competitiveness of their tax rates and structures. Four of the 10 worst-performing states on this year’s Index are also among the 10 states with the most outbound migration in this year’s National Movers Study (New Jersey,  New York, Connecticut, and California).

Here’s the map showing states ranked my migration status.

Similar data also is collected by U-Haul.

Mark Perry of the American Enterprise Institute put together this visual on the states with the most in-migration and out-migration.

He looked at the data based on voting patterns. I’m more interested in the fact that states without income taxes do very well.

By the way, we don’t have to rely on moving companies.

And here are some excerpts from an editorial by the Wall Street Journal on the topic, based on data from the IRS and Census Bureau.

Slowing population growth will have significant economic and social implications for the country, but especially for high-tax states. The Census Bureau and IRS last week also released state population growth and income migration data for 2018 that show the exodus from high-tax to low-tax states is accelerating. …New York was the biggest loser as a net 180,000 people left for better climes. Over the last decade New York has lost more of its population to other states (7.2%) than any other save Alaska (8%), followed by Illinois (6.8%), Connecticut (5.6%) and New Jersey (5.5%). Hmmm, what do these states have in common? Large tax burdens… Where are high-tax state exiles going? Zero income tax Florida drew $16.5 billion in adjusted gross income last year. Many have also fled to Arizona ($3.5 billion), Texas ($3.5 billion), North Carolina ($3 billion), Nevada ($2.3 billion), Colorado ($2.1 billion), Washington ($1.7 billion) and Idaho ($1.1 billion). Texas, Nevada and Washington don’t have income taxes.

Here’s an accompanying visual.

Once again, we see a pattern.

Tax policy obviously isn’t the only factor that drives migration between states, but it’s clear that lower-tax states tend to attract more migration, while higher-tax states tend to drive people away.

And keep in mind that when people move, their taxable income moves with them.

Which brings me back to my opening analysis about trends. Over time, the uncompetitive states are digging themselves into a hole. Migration (at least by people – the Golden Geese – who earn money and pay taxes) in any given year may not make a big difference, but the cumulative impact will wind up being very important.

P.S. Speaking of which, feel free to cast your vote for the state most likely to suffer fiscal collapse.

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