State-to-state migration is an underappreciated issue, for both economic and political reasons. And I’ve explained that taxes play a huge role.
- In Part I of this series, we looked at how people – and taxable income – are moving from high-tax states to low-tax states.
- In Part II of this series, we reviewed how tax-motivated migration will create further fiscal nightmares for high-tax states.
- In Part III of this series, I shared excerpts from a column I wrote for Bloomberg about why state tax competition is desirable.
For Part IV of this series, let start with this map from Axios showing the 10 biggest state-to-state moves in 2022.
The obvious takeaway is that people are escaping the fiscal hellholes of California and New York.
The second takeaway is that tax migrants are mostly picking states with no income tax. And when they don’t move to states with no income tax, they move to states with flat taxes.
But there is a very interesting story to tell about the state of Washington. Yes, it’s getting plenty of tax refugees from California, but it’s also losing one very prominent taxpayer.
Because although Washington has no income tax, politicians are trying to impose one. And they already have saddled their taxpayers with a capital gains tax and a death tax.
Jeff Jacoby of the Boston Globe explains that those taxes won’t collect any money from Jeff Bezos.
Jeff Bezos, the founder of Amazon and the third-richest person in the world, has lived in Washington state for nearly 30 years. …he has decided to relocate to Miami. …Bezos is almost certainly going to save money — a lot of money — once he is no longer subject to Washington’s tax laws. To begin with, Washington has a new capital gains tax, which was upheld by the state’s highest court in March. …By relocating to Florida, he ensures that future stock sales will likewise remain untouched by Washington’s new capital gains levy. That’s not all. Washington had no estate tax during the years when Bezos was building Amazon into a commercial giant, but that changed after 2005. Now Washington has the steepest death tax in the nation, with a top rate of 20 percent on estates worth more than $9 million. Florida, on the other hand, has no estate tax at all. For a man with a personal fortune of more than $160 billion, the move from Washington to Florida could be worth $30 billion or more to his heirs.
What’s the logical conclusion?
Jacoby provides the answer, telling politicians that Bezos and other rich people can vote with their feet.
He has also provided fresh evidence of an economic fact of life: When taxes get too high in one state, the wealthy can move to another one. …In progressive circles, it remains an article of faith that high tax rates don’t drive people to flee, but evidence to the contrary is overwhelming. Massachusetts, Washington, California, and Illinois can keep waving goodbye as prosperous taxpayers keep relocating to Florida, Texas, Arizona, and New Hampshire. Or they can pull their heads out of the sand and acknowledge that reality isn’t optional. In the real world, when you try to soak the rich, you’re apt to lose the rich.
Amen. The geese with the golden eggs can and will fly away. One of the reasons that tax competition should be celebrated.
[…] that doesn’t mean the tax will be a net plus for politicians. You also need to consider that the exodus of successful taxpayers will lead to less revenue from sales taxes, property taxes, and other […]
[…] doesn’t mean the tax will be a net plus for politicians. You also need to consider that the exodus of successful taxpayers will lead to less revenue from sales taxes, property taxes, and other […]
[…] we have more and more evidence that taxpayers are “voting with their feet” by moving to the lower-tax […]
[…] the final segment of my five-part series for 2023 on blue-to-red tax migration (previous versions here, here, here, and […]
[…] you want to know why that matters, check out the data on how Americans are voting with their […]
[…] Blue-to-Red Tax Migration, Part IV […]
Perhaps you’d consider writing an article about the total tax package that makes a state (un)attractive. For example, states that don’t have an income tax aren’t necessarily freer than those with one when you consider all policies holistically. Consider this article: “New Hampshire falls to 40th on CNBC’s annual ‘Top States for Business’ list.” I’ve seen polls of businesspeople who say they prefer Massachusetts to NH because it’s overall climate is friendlier to business than NH. Despite NH Governor Sununu’s rhetoric, he’s not as committed to liberty as you might think. As one person I know who lives in the state said to me, he’s a right wing authoritarian. This would be an interesting topic for Dan to write about.
[…] Blue-to-Red Tax Migration, Part IV […]
Then they get here, run for office, and turn where we are into where they came from. Disgusting.
An add-on point. Yes, some individuals and businesses migrate in pursuit of lower taxes. But that’s not the only tax-related reason. States with lower taxes and regulations create more jobs. This draws inward migration from other states. Both reasons argue in favor of lower taxes, but one is direct (I’m moving to obtain lower taxes) and one is indirect (I’m moving to obtain a job).
Austin Texas is so full of Californians that VOTE like Californians that the uncontested races are all democrats. AND they did the defund the police thing- to a resultant rise in crime. Now they’re complaining about all the homeless living along their beautiful creeks.
But I shouldn’t complain, I sold my house there without even putting it on the market.