Blue-to-Red Migration, Part I

I realize it’s not nice to take pleasure in the misfortune of others, but that rule does not apply when bad things happen to greedy politicians.

As such, I greatly enjoy reading about when taxpayers “vote with their feet” by moving from high-tax jurisdictions to low-tax jurisdictions.

I enjoy when there is tax-motivated migration between nations.

And I enjoy when there is tax-motivated migration between states.

Regarding the latter version, there’s a must-read editorial in the Wall Street Journal about the ongoing exodus from fiscal hellholes such as Illinois, New York, and California.

The IRS each spring publishes data on the movement of adjusted gross income (AGI) and taxpayers across state lines from year to year. …the IRS data shows blue states are losing taxpayers and income at an increasing clip. …a net 105,000 people left Illinois in 2021, taking with them some $10.9 billion in AGI. That’s up from $8.5 billion in 2020 and $6 billion in 2019. New York’s income loss increased to $24.5 billion in 2021 from $19.5 billion in 2020 and $9 billion in 2019. California lost $29.1 billion in 2021, more than triple what it did in 2019. By contrast, the lowest tax states added some $100 billion of income during the pandemic. Zero-income-tax Florida gained $39.2 billion—up from $23.7 billion in 2020 and $17.7 billion in 2019. About $9.8 billion of the total arrived from New York, $3.9 billion from Illinois, $3.7 billion from New Jersey and $3.5 billion from California. Texas was another winner, attracting a net $10.9 billion in 2021, which follows a gain of $6.3 billion in 2020 and $4 billion in 2019. Californians represented more than half of Texas’s income gain in 2021.

Congratulations to Texas and Florida. Having no income tax is definitely a smart step.

Here is a chart that accompanied the editorial.

By the way, migration is the headline event, but it is also important to pay attention to who is migrating.

The WSJ‘s editorial notes that the people leaving high-tax states tend to be economically successful.

The IRS data shows that the taxpayers leaving Illinois and New York typically made about $30,000 to $40,000 more than those arriving. Of Illinois’s total out-migration, 28% of the leavers made between $100,000 to $200,000 and 23% made $200,000 or more. By contrast, the average return of a Florida newcomer in 2021 was about $150,000—more than double that of taxpayers who left. High earners spend more, which yields higher sales tax revenue. This helped Florida post a record $22 billion budget surplus last year. California is forecasting a $29.5 billion deficit.

In other words, the geese with the golden eggs are flying away.

Read Full Post »

A Major Victory for Students in Florida

I almost feel sorry for the union bosses at the National Education Association and the American Federation of Teachers.

They were upset when West Virginia adopted statewide school choice in 2021 and they got even angrier when Arizona did the same thing in 2022.

So you can only imagine how bitter they are about what’s happened so far in 2023.

• Iowa has approved statewide school choice
• Utah has approved statewide school choice
• Arkansas has approved statewide school choice

But notice I started this column by stating that “I almost felt sorry” for union bosses.

In reality, I’m actually overjoyed that they are having a very bad year. Teacher unions are the leading political force in trying to keep kids trapped in bad schools, an approach that is especially harmful to minorities.

Their bad year just got much worse.

That’s because Florida just expanded its school choice program so that all children will be eligible.

Here’s some of the coverage from Tampa.

A massive expansion of Florida’s school-choice programs that would make all students eligible for taxpayer-backed vouchers is headed to Gov. Ron DeSantis… DeSantis already has pledged to sign the proposal, which includes removing income-eligibility requirements that are part of current voucher programs. …Under the bill, students would be eligible to receive vouchers if they are “a resident of this state” and “eligible to enroll in kindergarten through grade 12” in a public school.

And here’s a report from Orlando.

The Florida Senate gave final approval Thursday to a bill creating universal school vouchers… Republican state lawmakers, who hold a supermajority in the Legislature, want to open state voucher programs that currently provide scholarships to more than 252,000 children with disabilities or from low-income families to all of the 2.9 million school-age children in Florida… The bill would give any parent the choice to receive a voucher for their child to be used for private school tuition or homeschooling services and supplies — as long as that student was not enrolled in public school. DeSantis has been a supporter of the programs.

Let’s conclude with some excerpts from a Wall Street Journal editorial.

Florida has long been a leader on K-12 choice, vying with Arizona to offer the most expansive options in the nation. On Thursday Florida caught up with Arizona’s universal education savings account program by making its existing school choice offerings available to any student in the state. …The legislation…would remove income eligibility limits on the state’s current school voucher programs. It would also expand the eligible uses for the roughly $7,500 accounts to include tutoring, instructional materials and other education expenses, making these true ESAs rather than simply tuition vouchers. The bill prioritizes lower-income families and provides for home-schooled students to receive funds. Gov. Ron DeSantis, who has greatly advanced school choice in his state, is expected to sign.

By the way, the WSJ notes that Georgia may fall short in the battle to give families better educational options. As a rabid Georgia Bulldog who likes nothing better than stomping on the Florida Gators, it galls me that a handful of bad Republican legislators in the Peach State are standing in the proverbial schoolhouse door.

I’ll close by noting that there already are many reasons for Americans to migrate to Florida, such as no state income tax.

School choice means that there will be another big reason to move to the libertarian-friendly Sunshine State.

P.S. I can’t wait to see what this map looks like next year.

Read Full Post »

New York vs. Florida, Round #5

The first four rounds of my New York vs. Florida contest (available here, here, here, and here) largely focused on Florida’s superior economic policies and superior economic results.

So you won’t be surprised to learn that Round #5 continues that tradition.

We’ll start today’s column with a remarkable comparison put together by the Wall Street Journal.

Notice that Florida now has more population (thanks in large part to interstate migration), yet New York’s budget is twice as big.

That means a much higher tax burden.

And New York’s onerous fiscal burden doubtlessly helps to explain why Florida has been growing so much faster, and also has a much lower unemployment rate.

The Wall Street Journal connected the dots as part of its editorial.

Comparative governance is a useful course of study, not least because bad governance is so costly to people and prosperity. We often write about the migration from the Northeast to Florida and other states, but sometimes the contrast is best illuminated with some data. …As recently as 2013 the two states had similar populations, but so many people have moved to the Sunshine State that it’s now roughly 2.6 million people larger. Yet, believe it or not, Florida’s state budget as measured in the latest proposals from the two governors, is only half the size of New York’s. This is in part a reflection of their tax burden, which in Florida is much smaller. …Florida has no state income tax, while New York’s top tax rate is 10.9%. In New York City, the top rate is 14.8%, while in Miami it’s zero. …Florida’s jobless rate was 2.5% in December, well below the January national 3.4% rate. New York’s rate was 4.3%, tied with Alaska and Michigan for fifth worst in the country… State GDP growth in Florida in 2012 dollars from 2016-2021 was more than double New York’s—17% to 8%. These comparative statistics…show that better governance yields better fiscal and economic results.

Amen.

I’ve written that there’s a link between national policy and national prosperity.

The same is true for state policy and state prosperity.

P.S. A reader sent me a fill-in-the-blanks essay generator for leaving New York. It focuses on quality of life rather than public policy, but I nonetheless made some choices.

P.P.S. Another Florida advantage is a lower cost of living.

P.P.P.S. New York’s absurd Medicaid spending (presumably enabled by this type of scam) is yet another reason to reform that money-pit program.

Read Full Post »

More Academic Evidence for School Choice

Since teacher unions care more about lining their pockets and protecting their privileges rather than improving education, I’ll never feel any empathy for bosses like Randi Weingarten.

That being said, the past couple of years have been bad news for Ms Weingarten and her cronies.

Not only is school choice spreading – especially in states such as Arizona and West Virginia, but we also are getting more and more evidence that competition produces better results for schoolkids.

In a study published by the National Bureau of Economic Research, Professors David N. Figlio, Cassandra M.D. Hart & Krzysztof Karbownik found that school choice led to benefits even for kids who remained stuck in government schools.

They enjoyed better academic outcomes, which is somewhat surprising, but even I was pleasantly shocked to see improved behavioral outcomes as well.

School choice programs have been growing in the United States and worldwide over the past two decades, and thus there is considerable interest in how these policies affect students remaining in public schools. …the evidence on the effects of these programs as they scale up is virtually non-existent. Here, we investigate this question using data from the state of Florida where, over the course of our sample period, the voucher program participation increased nearly seven-fold. We find consistent evidence that as the program grows in size, students in public schools that faced higher competitive pressure levels see greater gains from the program expansion than do those in locations with less competitive pressure. Importantly, we find that these positive externalities extend to behavioral outcomes— absenteeism and suspensions—that have not been well-explored in prior literature on school choice from either voucher or charter programs. Our preferred competition measure, the Competitive Pressure Index, produces estimates implying that a 10 percent increase in the number of students participating in the voucher program increases test scores by 0.3 to 0.7 percent of a standard deviation and reduces behavioral problems by 0.6 to 0.9 percent. …Finally, we find that public school students who are most positively affected come from comparatively lower socioeconomic background, which is the set of students that schools should be most concerned about losing under the Florida Tax Credit Scholarship program.

It’s good news that competition from the private sector produces better results in government schools.

But it’s great news that those from disadvantaged backgrounds disproportionately benefit when there is more school choice.

Wonkier readers will enjoy Figure A2, which shows the benefits to regular kids on the right and disadvantaged kids on the left.

Since the study looked at results in Florida, I’ll close by observing that Florida is ranked #1 for education freedom and ranked #3 for school choice.

P.S. Here’s a video explaining the benefits of school choice.

P.P.S. There’s international evidence from Sweden, Chile, Canada, and the Netherlands, all of which shows superior results when competition replaces government education monopolies.

Read Full Post »

America’s Most Libertarian State Is…

When I wrote about the 2018 edition of Freedom in the 50 States, Florida ranked as the nation’s most libertarian state.

In the 2021 version, New Hampshire takes the top spot (reclaiming the lead it had back in 2016).

Here’s a map showing the 10 best and 10 worst states. One obvious takeaway is that New Hampshire deserves extra praise because it is in a region where there seems to be a general disdain for economic and personal liberty.

And here’s a table showing how all the states rank.

As you can see, Florida is still a very good state.

Indeed, Florida is getting better over time. All that happened in the new edition of Freedom in the 50 States is that New Hampshire got better even faster.

This seems to be a pattern.

You can see from Figure 9 that the best states have been getting better over the past 10 years while the worst states are stagnating.

If you want some background on the publication, here’s how the authors (Will Ruger and Jason Sorens) describe their index.

…the 2021 edition examines state and local government intervention across a wide range of policy categories—from taxation to debt, from eminent domain laws to occupational licensing, and from drug policy to educational choice. …We…strive to make it the most comprehensive and definitive source for economic freedom data on the American states. …Although the United States has made great strides toward respecting each individual’s rights regardless of race, sex, age, or sexual preference, some individuals face growing threats to their interests in some jurisdictions. Those facing more limits today include smokers, builders and buyers of affordable housing, aspiring professionals wanting to ply a trade without paying onerous examination and education costs, and less-skilled workers priced out of the market by minimum-wage laws. Moreover, although the rights of some have increased significantly in certain areas, for the average American, freedom has declined generally because of federal policy that includes encroachment on policies that states controlled 20 years ago.

For more information, here’s how the states rank for economic freedom.

And here are the rankings for personal freedom.

Let’s look at the some other tables.

Since I’m most interested in fiscal policy, I’m reflexively drawn to Table 7. Kudos to Florida, Tennessee, New Hampshire, and South Dakota (the absence of a state income tax really helps). And I’m surprised to see Massachusetts in the top 10 (it helps to a have a flat tax).

For what it’s worth, Hawaii really stinks. And I’m not surprised to see New York next to last.

Here’s a look at how states have changed since 2000.

No big surprises, though it’s interesting to note that North Dakota (which was ranked #1 back in 2013) has suffered a relative decline (now ranked #15) simply because its improvement has been rather modest compared to the big improvements in other states.

P.S. For those interested in methodological issues, here’s a look at the formula used to determine which states have the most freedom and least freedom.

P.P.S. If you look at the weighting for personal freedom, you’ll find that educational freedom is 2 percent of a state’s score. Given the importance of school choice (for both individual education outcomes and national economic competitiveness), I wonder if that variable is insufficiently appreciated.

Read Full Post »

New York vs. Florida, Round #4

Politicians from New York want states to get a big bailout from Uncle Sam. I explained earlier this month that this would be a bad idea.

Simply stated, the Empire State is in big trouble because it has a bloated government, not because of the coronavirus.

Probably the strongest piece of evidence is that New York is ranked #50 for fiscal policy according to Freedom in the 50 States.

If you want to understand how New York’s politicians have created a fiscal disaster, let’s compare the Empire State to Florida, which is ranked #1.

I’ve already done that three times (Round #1, Round #2, and Round #3), so this will be Round #4.

The Wall Street Journal compared the two states in an editorial two days ago.

…let’s do the math to consider which state has managed its economy and finances better over the last decade. …Democrats in Albany are claiming to be victims of events that are out of their control. But they have increased spending by $43 billion since 2010—about $570,000 for each additional person. Florida’s budget has increased by $28 billion while its population has grown 2.7 million—a $10,400 increase per new resident. New York has a top state-and-local tax rate of 12.7%, while Florida has no income tax. Yet New York has a growing budget deficit, while Mr. Scott inherited a large deficit but built a surplus and paid down state debt. The difference is spending. …Blame New York’s cocktail of generous benefits, loose eligibility standards and waste. New York spends about twice as much per Medicaid beneficiary and six times more on nursing homes as Florida though its elderly population is 20% smaller. …The rate of private job growth in Florida has been about 60% higher than in New York from January 2010 to January 2020. Finance jobs expanded by 25% in Florida compared to 9.7% in New York. …The policy question is why taxpayers in Florida and other well-managed states should pay higher taxes to rescue an Albany political class that refuses to restrain its tax-and-spend governance. Public unions soak up an ever-larger share of tax dollars, but Albany refuses to change.

If you want further details on the difference between the two states, Chris Edwards takes a close look at the burden of government spending.

New York and Florida have similar populations of 20 million and 21 million, respectively. But governments in New York spent twice as much as governments in Florida, $348 billion compared to $177 billion. On some activities, spending in the two states is broadly similar… But in other budget areas, New York’s excess spending is striking. New York spent $69 billion on K-12 schools in 2017 compared to Florida’s $28 billion. Yet the states have about the same number of kids enrolled—2.7 million in New York and 2.8 million in Florida. New York spent $71 billion on public welfare compared to Florida’s $28 billion. Liberals say that governments provide needed resources to people truly in need. Conservatives say that generous handouts induce high demand whether people need it or not. Given that New York’s welfare costs are 2.5 times higher than Florida’s, the latter effect probably dominates. …New York governments employed 1,196,632 workers in 2017 compared to Florida’s 889,950 (measured in FTEs). …Most New York residents do not benefit from bloat in government payrolls, inefficient transit, excessive welfare, and deficit spending. To them, the high taxes are disproportionate to the government services received. That is why they are moving to better‐​managed states with lower taxes.

Here’s the accompanying chart.

And he also compares the level of bureaucracy in both states.

New York’s excess includes spending more on handouts such as welfare. Another cause of New York’s high spending is employment of more government workers and paying them more than in Florida. …New York governments employ 34 percent more workers than Florida governments. …The two states have similar K-12 school enrollments of 2.7 million in New York and 2.8 million in Florida. But New York employs 31 percent more teachers and administrators than Florida. Do the 111,000 extra staff in New York generate better school outcomes? Apparently not…study puts Florida near the top and New York in the middle on school quality. Does New York really need two times more highway workers than Florida and three times more welfare workers? …Government workers in New York make 42 percent more in wages than government workers in Florida, on average.

Here’s the accompanying chart.

The bottom line is that New York is a great place to be an over-paid bureaucrat in an over-staffed bureaucracy.

But if you’re a taxpayer, Florida is the easy winner – which may explain why so many productive people are leaving the Empire State and permanently migrating to the Sunshine State.

P.S. The same pattern exists all across the United States. Taxpayers are escaping the poorly managed states and fleeing to low-tax states. Especially ones with no income taxes.

Read Full Post »

New York vs. Florida, Round #3

I looked last year at how Florida was out-competing New York in the battle to attract successful taxpayers, and then followed up with another column analyzing how the Sunshine State’s low-tax policies are attracting jobs, investment, and people from the Empire State.

Time for Round #3.

A new article in the Wall Street Journal explains how successful investors, entrepreneurs, and business owners can save a massive amount of money by escaping states such as New York and moving to zero-income-tax states such as Florida.

This table has the bottom-line numbers.

As explained in the article, taxpayers are discovering that the putative benefits of living in a high-tax state such as New York simply aren’t worth the loss of so much money to state politicians (especially now that the 2017 tax reform sharply reduced the tax code’s implicit subsidy for high-tax states).

There’s a way for rich homeowners to potentially shave tens of thousands of dollars from their tax bills. They can get that same savings the next year and the following years as well. They can cut their taxes even further after they die. What’s the secret? Moving to Florida, a state with no income tax or estate tax. Plenty of millionaires and billionaires have been happy to ditch high-tax states like New York, New Jersey, Connecticut and California. …A New York couple filing jointly with $5 million in taxable income would save $394,931 in state income taxes by moving to Florida… If they had moved from Boston, they’d save $252,500; from Greenwich, Conn., they’d knock $342,700 off their tax bill. …Multimillionaires aren’t just moving their families south, they are taking their businesses with them, says Kelly Smallridge, president and CEO of the Business Development Board of Palm Beach County. “We’ve brought in well over 70 financial-services firms” in the past few years, she says. “The higher the taxes, the more our phone rings.”

An article in the Wall Street Journal late last year explained how states such as Florida are big beneficiaries of tax migration.

David Tepper, Paul Tudor Jones and Barry Sternlicht are among the prominent transplants who have pulled up roots in New York, New Jersey or Connecticut in recent years for Florida. New Yorker Carl Icahn has said he is moving his company to Miami next year. …The loss of the super-wealthy isn’t just a matter of reputation. The exodus of billionaires can crimp state budgets. …The SALT cap has widened the gap between Florida and other states with no income tax, such as Wyoming, and New York City, where residents can owe income taxes at rates that approach 13%.

In a column for National Review, Kevin Williamson analyzes the trade-offs for successful people…and the implications for state budgets.

…one of the aspects of modern political economy least appreciated by the class-war Left: Rich people have options. …living in Manhattan or the nice parts of Brooklyn comes with some financial burdens, but for the cool-rich-guy set, the tradeoff is worth it. …metaphorically less-cool guys are in Florida. They have up and left the expensive, high-tax greater New York City metropolitan coagulation entirely. …Florida has a lot going for it…: Lower taxes, better governance, superior infrastructure… The question is not only the cost, but what you get for your money. Tampa is not as culturally interesting as New York City. …the governments of New York City and New York State both are unusually vulnerable to the private decisions of very wealthy households, because a relatively small number of taxpayers pays an enormous share of New York’s city and state taxes: 1 percent of New Yorkers pay almost half the taxes in the state, and they know where Florida is. New York City has seen some population loss in recent years, and even Andrew Cuomo, one of the least insightful men in American politics, understands that his state cannot afford to lose very many millionaires and billionaires. “God forbid if the rich leave,” he has said. New York lost $8.4 billion in income to other states in 2016 because of relocating residents.

Earlier in 2019, the WSJ opined on the impact of migration on state budgets.

Democrats claim they can fund their profligate spending by taxing the rich, but affluent New Yorkers are now fleeing to other states. The state’s income-tax revenue came in $2.3 billion below forecast for December and January. Mr. Cuomo blamed the shortfall on the 2017 federal tax reform’s $10,000 limit on state-and-local tax deductions. But the rest of the country shouldn’t have to subsidize New York’s spending, and Mr. Cuomo won’t cut taxes.

To conclude, this cartoon cleverly captures the mentality of politicians in high-tax states.

Needless to say, grousing politicians in high-tax states have no legitimate argument. If they don’t provide good value to taxpayers, they should change policies rather than whining about out-migration.

By the way, this analysis also applies to analysis between nations. Why, for instance, should successful people in France pay so much money to their government when they can move to Switzerland and get equivalent services at a much-lower cost.

Heck, why move to Switzerland when you can move to places where government provides similar services at even lower cost (assuming, of course, that anti-tax competition bureaucracies such as the OECD don’t succeed in their odious campaign to thwart the migration of people, jobs, and money between high-tax nations and low-tax nations).

P.S. If you want to see how states rank for tax policy, click here, here, here, and here.

Read Full Post »

America’s Best and Worst States for Taxes

Following their recent assessment of the best and worst countries, the Tax Foundation has published its annual State Business Tax Climate Index, which is an excellent gauge of which states welcome investment and job creation and which states are unfriendly to growth and prosperity.

Here’s the list of the best and worst states. Unsurprisingly, states with no income tax rank very high, as do states with flat taxes.

It’s also no surprise to see New Jersey in last place. The state has fallen dramatically, especially considering that it was like New Hampshire as recently as the 1960s, with no state income tax and no state sales tax.

And the bad scores for New York, California, and Connecticut also are to be expected. The Nutmeg State is an especially sad story. There was no state income tax 30 years ago. Once politicians got that additional source of revenue, however, Connecticut suffered a big economic decline.

Here’s a description of the methodology, along with the table showing how different factors are weighted.

…the Index is designed to show how well states structure their tax systems and provides a road map for improvement.The absence of a major tax is a common factor among many of the top 10 states. Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax. …This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes. Indiana and Utah, for example, levy all of the major tax types, but do so with low rates on broad bases.The states in the bottom 10 tend to have a number of afflictions in common: complex, nonneutral taxes with comparatively high rates. New Jersey, for example, is hampered by some of the highest property tax burdens in the country, has the second highest-rate corporate income tax in the country and a particularly aggressive treatment of international income, levies an inheritance tax, and maintains some of the nation’s worst-structured individual income taxes.

For those who want to delve into the details, here are all the states, along with their rankings for the five major variables.

If you want to know which states are making big moves, Georgia enjoyed the biggest one-year jump (from #36 to #32) and Kansas suffered the biggest one-year decline (from #27 to #34). Keep in mind that it’s easier to climb if you’re near the bottom and easier to fall if you’re near the top.

Looking over a longer period of time, the states with the biggest increases since 2014 are North Carolina (+19, from #34 to #15), Wisconsin (+12, from #38 to #26), Kentucky (+9, from #35 to #24), Nebraska (+8, from #36 to #28), Delaware (+7, from #18 to #11), and Rhode Island (+6, from #45 to #39).

The states with the biggest declines are Kansas (-9, from #25 to #34), Hawaii (-8, from #29 to #37), Massachusetts (-8, from #28 to #36), and Idaho (-6, from #15 to #21).

We’ll close with the report’s map, showing the rankings of all the states.

P.S. My one quibble with the Index is that there’s no variable to measure the burden of government spending, which would give a better picture of overall economic liberty. This means that states that finance large public sectors with energy severance taxes (which also aren’t included in the Index) wind up scoring higher than they deserve. As such, I would drop Wyoming and Alaska in the rankings and instead put South Dakota at #1 and Florida at #2.

Read Full Post »

The Continuing Tax Migration to Florida

Like most libertarians, I’m a bit quirky.

Most people, if they watch The Great Escape or Rambo II, cheer when American POWs achieve freedom.

I’m happy as well, but I also can’t stop myself from thinking about how I also applaud when a successful taxpayer flees from a high-tax state to a low-tax state.

It’s like an escape from oppression to freedom, though I confess it might not be the best plot for a blockbuster movie.

In any event, here are two recent feel-good stories about this phenomenon.

Here’s a report about two members of the establishment media who are protecting their family’s finances from greedy Connecticut politicians.

After reports that married MSNBC anchors Joe Scarborough and Mika Brzezinski have been mysteriously broadcasting their show from Florida — sources speculated that the location is to benefit Scarborough’s tax situation. The “Morning Joe” anchors have been reportedly on a home set in Jupiter, Fla., but using Washington, DC, backdrops. Sources said the reason for the locale was a “tax dodge” — albeit a completely legal one — since Scarborough has a home in Florida and would need to spend a certain amount of the time there for any tax benefit. …Scarborough, who’s still presently registered to vote in Connecticut., on Oct. 9, 2018 registered to vote in Palm Beach County, Fla. according to public records. …By moving to Florida, he’d reduce his tax burden by roughly $550,000. Scarborough reportedly makes $8 million a year and would pay 6.99-percent state income tax in Connecticut, while there’s no state income tax in Florida, the Post’s Josh Kosman reports. To qualify as a Florida resident, he’d need to be there 183 days a year.

According to the story, Scarborough and Brzezinski are only making the move to be close to aging parents.

That certainly may be part of the story, but I am 99.99 percent confident that they won’t be filing another tax return with the Taxnut State…oops, I mean Nutmeg State.

Meanwhile, another billionaire is escaping from parasitic politicians in New York and moving to zero-income tax in Florida.

Billionaire Carl Icahn is planning to move his home and business to Florida to avoid New York’s higher taxes, according to people familiar with the matter. …The move is scheduled for March 31 and employees who don’t do so won’t have a job… Hedge fund billionaires have relocated to Florida for tax reasons for years — David Tepper, Paul Tudor Jones and Eddie Lampert being among the most prominent. But Florida officials have been aggressively pushing Miami as a destination for money managers since the Republican-led tax overhaul. …Florida is one of seven states without a personal income tax, while New York’s top rate is 8.82%. Florida’s corporate tax rate is 5.5%, compared with 6.5% in New York. Icahn’s move was reported earlier by the New York Post. The difference could mean dramatic savings for Icahn, who is the world’s 47th richest person.

These two stories are only anecdotes. And without comprehensive data, there’s no way of knowing if they are part of a trend.

That’s why the IRS website that reports the interstate movement of money is so useful (it’s not often I give the IRS a compliment!). You can peruse data showing what states are losing income and what states are gaining income.

Though if you want a user-friendly way of viewing the data, I strongly recommend How Money Walks. That website allows you to create maps showing the net change in income and where the income is coming from, or going to.

Since our first story was about Connecticut, here’s a map showing that the Nutmeg State has suffered a net exodus (red is bad) over the 1992-2016 period.

In other words, the state is suffering from fiscal decay.

And here’s a map for New York, where we see the same story.

Now let’s look at the state that is reaping a windfall thanks to tax refugees.

Florida, to put it mildly, is kicking New York’s derrière (green is good).

And you can see on the left side that Florida is also attracting lots of taxpayers from New Jersey, Illinois, Pennsylvania, and Connecticut.

By the way, some of my leftist friends claim this internal migration is driven by weather. I suspect that’s a partial factor, but I always ask them why people (and their money) are also migrating out of California, where the weather is even better.

P.S. Tax migration is part of tax competition, and it’s a big reason why left-wing governments sometimes feel compelled to lower taxes.

P.P.S. When the IRS releases data for 2017 and 2018, I’m guessing we’ll see even more people escaping to Florida, in large part because there’s now a limit on deducting state and local taxes.

P.P.P.S. I also cheer when people escape high-tax nations.

Read Full Post »

New York Vs. Florida, Round #2

I used to think Texas vs. California was the most interesting and revealing rivalry among states. It was even the source of some clever jokes and cartoons.

But the growing battle between Florida vs. New York may now be even more newsworthy.

I wrote last month about how many entrepreneurs, investors and business owners are escaping bad tax policy by moving from the Empire State to the Sunshine State.

Not that we should be surprised.

Florida ranks #1 for economic freedom while New York languishes in last place.

A big reason for the difference is that Florida has no state income tax, which compares very favorably to the punitive system in New York.

And because the federal tax code no longer provides an unlimited deduction for state and local taxes, I expect the exodus from New York to Florida to accelerate.

What’s especially amusing is that Alexandria Ocasio-Cortez’s mother is one of the tax refugees.

Here are some excerpts from a report in the New York Post.

The mother of soak-the-rich Congresswoman Alexandria Ocasio-Cortez said she was forced to flee the Big Apple and move to Florida because the property taxes were so high. “I was paying $10,000 a year in real estate taxes up north. I’m paying $600 a year in Florida. It’s stress-free down here,” Blanca Ocasio-Cortez told the Daily Mail… Her daughter raised eyebrows with her pitch to hike the top marginal tax rate on income earned above $10 million to 70 percent. She has also gotten behind the so-called Green New Deal, which would see a massive and costly government effort.

The former Governor of Florida (and new Senator from the state) obviously is enjoying the fact that New York politicians are upset.

Here’s some of what Rick Scott wrote in today’s Wall Street Journal.

America is a marketplace where states are competing with each other, and New York is losing. Their loss is Florida’s gain… I would like to tell New Yorkers on behalf of the rest of America that our hearts go out to you for your sagging luxury real-estate market. But you did this to yourself, and you can fix it yourself. If you cut taxes and make state and local government efficient, maybe you can compete… I made more than 20 trips to high-tax states like California, Connecticut, Illinois, New York and Pennsylvania to lure businesses to Florida. The tax-happy leaders of those states were furious, which made the visits all the more enjoyable for me. They called me every name in the book. But they were the ones who raised taxes, and bad decisions have consequences. The elites in New York and Washington should commission a study of Florida to see what happens when conservative ideas are put into practice. …Florida’s economy is thriving, expanding at a record pace. …There’s a reason Rep. Alexandria Ocasio-Cortez’s mom left New York for Florida. And there’s a reason companies are fleeing high-tax states, bringing jobs with them to Florida.

I mentioned above that having no state income tax gives Florida a big advantage over New York.

Courtesy of Mark Perry, here a comprehensive comparison of the two states.

Wow. If this was a tennis tournament, the announcers would be saying “game, set, and match.” And if it was a boxing contest, it would be a knock-out.

The bottom line is that we should expect more rich people to escape New York and move to Florida because they’ll get to keep more of their money.

And we should expect more lower-income and middle-class people to also make the same move because Florida’s better policy means more jobs and more opportunity (sadly, Rep. Ocasio-Cortez has learned nothing from her mother’s move).

P.S. New York actually doesn’t do terribly in nationwide rankings for pension debt, though it is still below Florida.

Read Full Post »

New York vs. Florida, Round #1

I shared data a couple of weeks ago showing that Florida is the freest state in America (for both overall freedom and economic freedom) while New York is in last place (in both categories).

Well, it seems that freedom has consequences when people can “vote with their feet.”

We’ll start with an op-ed in the Miami Herald by Ed Pozzuoli.

In a recent press conference, New York Gov. Andrew Cuomo…mentioned Florida as an attractive option for New Yorkers who are unhappy… a Census Bureau report late last year detailing the states that lost residents because of high taxes, overregulation and dwindling opportunities. Leading the list? New York. …what jurisdiction did the Census folks say benefits the most from domestic “in-migration? You guessed it — Florida… our low-tax, business-friendly welcome to asylum seekers from Big Government states like New York… It’s Florida’s low taxes and reasonable regulatory environment that attract businesses here. Florida ranks sixth among states for new business creation. …Unlike the federal government, Florida balances its budget and does so without an income tax. New York can keep its big progressive government.

And that “big progressive government” means onerous and punitive taxes, as the Wall Street Journal opined.

New York City’s combined state and local top rate of 12.7% hits taxpayers earning more than $1 million and is the second highest in the country after California. The deduction limit raised New York’s top rate by an effective 5%, though this was partially offset by the tax reform’s 2.6 percentage-point reduction in the federal top rate. …According to IRS data we’ve examined, New York state lost $8.4 billion in income to other states in 2016 (the latest available data), up from $4.6 billion annually on average during the prior four years. Florida raked in the most New York wealth. Mr. Cuomo says that “a taxpayer in Florida would see no increase, or a decrease” under the GOP tax reform and “Florida also has no estate tax.” New York’s 16% estate tax hits assets over $10.1 million. …Mr. Cuomo promised to let New York’s tax surcharge on millionaires expire. But he has extended it again and again and now wants to renew it through 2024 because he says the state needs the money. Meantime, he warns that a wealth exodus could force spending cuts for education and higher taxes on middle-income earners. All of this was inevitable, as we and others warned. Yet rather than propose to make the state’s tax burden more competitive, Mr. Cuomo rages against a tax reform that has helped the overall U.S. economy, even in New York.

I especially enjoy how Governor Cuomo is irked because his state’s profligacy is no longer subsidized by an unlimited federal deduction for state and local taxes.

Investor’s Business Daily shares a similar perspective.

New York Gov. Andrew Cuomo…we appreciate his recent frankness on taxes. …”I don’t believe raising taxes on the rich,” Cuomo said. “That would be the worst thing to do. You would just expand the shortfall. God forbid if the rich leave.” …In support of his comments, Cuomo cited “anecdotal” evidence that showed high-income earners are leaving the high-tax Empire State for other low-tax states. But the evidence isn’t merely anecdotal. It’s a fact. …From 2010 to mid-2017, New York had a net outmigration of over 1 million people, more than any other state. No, they’re not all rich. But many are. …the wealthy have choices that others don’t. One of those choices is to move if taxes become not merely burdensome, but punitive. That’s what’s happening in New York. …Many high-income taxpayers are leaving New York for low-tax states, tired of paying the state’s bills and then being demonized leftist activists for being “rich” and told they must give more.

Let’s close with some excerpts from a column in the Washington Times by Richard Rahn. He compares New York, Virginia, and Florida.

…many high-income New Yorkers have been moving their tax homes to Florida, undermining the New York tax base. …Florida imposes no state and local income taxes… Florida is booming, with a budget surplus, while New York is mired in debt. Only 50 years ago, New York had four times the population of Florida, and now Florida is larger than New York. …the state of Florida…created an environment where businesses could flourish without undue tax burdens and government interference. It went from being a poor state to a prosperous one. …citizens of New York should be asking: Why they are required to pay such high state and local income tax rates while the citizens of Florida get by perfectly well without any state income tax; Why they have three times more per capita debt than Floridians, and infrastructure that is in far worse shape; …Why it takes a third more of their citizens’ personal income to run the government than in Virginia or Florida; Why their state takes twice the percentage of per capita income in taxes than Virginia and Florida; …When it comes to taxes and government services, people’s feet tell more about how they feel than their mouths.

And if you want to know why so many people are traveling down I-95 from New York to Florida, this table from Richard’s column tells you everything you need to know.

For what it’s worth, there are people who are willing to pay extra tax to live in certain high-tax states. New York City has an allure for some people, as does California’s climate and scenery.

But are those factors enough to compensate for awful tax systems? Will they save those states from economic decay?

At best, they’ll delay the day of reckoning. For what it’s worth, I actually think New Jersey or Illinois will be the first state to fiscally self-destruct.

You can cast your vote by clicking here.

Read Full Post »

Great Moments in State Government

States such as Illinois, California, New York, Connecticut, and New Jersey have very serious structural problems because of high tax burdens and unsustainable spending levels (often associated with excessive pay and benefits for bureaucrats).

I frequently write about those big issues, but I also like to periodically share examples of other bone-headed policies at the state level. These are not the types of policies that threaten bankruptcy, but they illustrate why it’s not a good idea to give power to politicians and bureaucrats.

• A threat of prison time in Indiana for rescuing a baby deer.
• An armed raid of an okra farm in Georgia.
• Spending more on bureaucracy than grants in Illinois.
• Corrupt insider dealing by a law firm in New York.

Here are some new examples.

We have a column in Forbes about the dangerous plague of unlicensed and unregulated (gasp!) cakes in New Jersey.

At first, she sold her baked goods to support her son’s school fundraisers. …Soon Heather started receiving requests from family, friends, sports fundraisers, and even a wedding venue. …With this business, Heather hoped she could pay for her son’s college education and one day open her own brick-and-mortar cake pop shop. Unfortunately, her dreams were dashed thanks to a law that exists only in New Jersey. Unlike 49 other states, selling baked goods made at home is illegal in the Garden State. Baking and selling just one cake, cookie or muffin risks fines as high as $1,000. When Heather learned she had to shut down her cake pop sideline, the news was “crushing,” she said.

As is so often the case when governments are suppressing liberty, “health and safety” is the excuse.

New Jersey’s main justification for the ban is to protect the public’s health and safety—a claim that’s belied by the fact that nearly every other state has a “cottage food” law on the books, which legalizes the sale of homemade cakes, cookies, jams and other food deemed “not potentially hazardous.” …In order to sell cake pops, cookies or other shelf-stable treats in New Jersey, Heather must either build a licensed “retail food establishment” separate from her home kitchen or she can rent a commercial kitchen, which can easily cost $35 an hour.

Fortunately, the Institute for Justice is fighting to overturn the law.

Heather and two other home bakers joined with the Institute for Justice and filed a lawsuit against the state earlier this month. …A similar IJ lawsuit has already defeated a pastry prohibition in Wisconsin. Over the summer, a Wisconsin judge struck down the state’s ban on selling home-baked goods because there was “no real or substantial connection” between the law and public safety. …In his ruling, Lafayette Circuit Court Judge Duane Jorgenson noted that the ban protected established businesses from greater competition, which is why groups like the Wisconsin Bakers Association heavily backed the law. …Those rulings followed a 2015 IJ court victory on behalf of home bakers in Minnesota, which galvanized the state to expand its cottage food laws. Now the state boasts over 3,000 cottage food producers.

Notice, by the way, that protecting an established interest group was the real purpose of the law. In other words, the law was basically similar to schemes for occupational licensing.

This next item is so strange that I wonder whether it is somehow fake. But I also suspect it’s too bizarre to be fake. In any event, I wonder about the reason for this government-mandated notice?!? And if you find a (gasp!) vending machine without the notice, what purpose is served by calling the number? And do the bureaucrats expect people to memorize the number in case they stumble upon a rogue vending machine?!?

Oh, and how long before some people figure out how to remove the notice and then call the government in hopes of getting the “cash reward”?

If anybody knows the answer to any of these questions, feel free to share your thoughts. In the meantime, I’ll simply assume that the notice presumably isn’t as pointless and stupid at this pedestrian sign and definitely not as creepy and malevolent as this “public service” notice.

Next, we have a story from ABC News about taxpayer-funded generosity to pets in Michigan.

A dog in western Michigan has been approved for unemployment benefits — and he’d be bringing in a cool $360 a week. Michael Haddock, of Saugatuck, Michigan, says he received a letter on Saturday from the State of Michigan Unemployment Insurance Agency (UIA) addressed to Michael Ryder, according to Grand Rapids ABC affiliate WZZM. Michael is his name. Ryder is his dog’s name. …Haddock says the employer listed on the letter was a restaurant chain in Metro Detroit. After receiving the letter, Haddock contacted the restaurant chain and the state unemployment office. …The Michigan UIA announced Tuesday it was creating a special investigative unit to handle the recent increase in fake unemployment claims. The agency attributes many of the claims to recent data breaches. Haddock isn’t sure how scammers got his dog’s name.

I’m clearly behind the times. I have some cats that need to sign up for handouts!

On a more serious note, I confess that I’m not aware of the degree to which unemployment benefits are fraudulent. Hopefully it’s not as bad as the EITC, though I’m confident that problem is bigger than politicians and bureaucrats would ever admit.

And why would folks in the government even care? After all, it’s our money they’re squandering rather than their own. And Milton Friedman educated us on what that means.

From the perspective of good public policy, though, the real problem with such benefits (as personalized here and here) is that they lure people into extended periods of joblessness.

Read Full Post »

Advice for Taxpayers: If You Can’t Move to Hong Kong or the Cayman Islands, Move to Florida or Indiana

One (hopefully endearing) trait of being a policy wonk is that I have a weakness for jurisdictional rankings. At least if they’re methodologically sound.

This is why I was so happy a couple of weeks ago when I got to peruse and analyze the 2016 version of Economic Freedom of the World (even if the results for America were rather depressing).

Heck, sometimes I even can’t resist commenting on methodologically unsound rankings, such as the profoundly stupid “Happy Planet Index” that puts despotic hellholes such as Cuba and Venezuela above the United States.

Given my interest in rankings, you can appreciate how excited I am that my colleague at Cato, Chris Edwards, just unveiled the 2016 version of his Fiscal Policy Report Card on America’s Governors and that the Tax Foundation just released its annual State Business Tax Climate Index. It’s sort of like Christmastime for me.

Here’s the big news from Chris’ Report Card. As a Virginia resident, I’m not terribly happy the Governor McAuliffe scores a D (not that his GOP predecessor was any good). It’s also perhaps somewhat newsworthy that Governor Pence earned an A (so he seems committed to smaller government even if the guy he’s paired with doesn’t share the same philosophy).

And here’s the Tax Foundation’s map showing each state’s ranking, with top-10 states in blue and bottom-10 states in light orange.

If you pay close attention, you’ll notice that zero-income-tax states are disproportionately represented among the states with the best scores.

All this is quite interesting (at least to me), but it occurred to me that it might be even more illuminating to somehow meld these two rankings together.

After all, Chris’s Report Card is a measure of whether a state is moving in the right direction or wrong direction while the Tax Foundation is more of a comparative measure of how a state ranks at a given point in time compared to other states.

So I created the following matrix that looks only at the states that received A or F in the Cato Report Card and also were either in the top 10 or bottom 10 of the Tax Foundation Index.

As you might guess, the best place to be is in the top-left portion of the matrix since that shows a state that is both moving in the right direction while also having a very competitive tax system. So kudos to Florida and Indiana (with honorable mention for North Carolina, which received an A in the Cato Report Card but just missed cracking the top 10 in the Tax Foundation Index).

The bad news, if you look at the bottom-left quadrant, is that there are three states with good tax systems but bad governors. South Dakota, Oregon, and Nevada are in strong shape today, but it’s hard to be optimistic about those states preserving their lofty rankings since policy is moving in the wrong direction.

And the worst place to be is the bottom-right quadrant, which means that a state has both a bad tax system and a bad policy environment.

Last but not least, the sad news is that the top-right quadrant is empty, which means there aren’t any bad states moving aggressively in the right direction.

So the bottom line is that American citizens should think about moving to Florida and Indiana. Especially if they live in Vermont, California, or Connecticut.

P.S. It would be even better to move to Monaco, Hong Kong, or the Cayman Islands, but those presumably aren’t very practical options for most of us.

P.P.S. Actually, the best place for an American taxpayer to live is Puerto Rico since it’s a legal tax haven.

Read Full Post »

I’m Thankful…that I’m Not an Idiot Education Bureaucrat from Florida

I’m thankful for the usual things, such as my kids and being an American.

But I’m also thankful I’m not a blithering idiot like the bureaucrats at a Florida school. Here are a few details of this astounding example of utter stupidity.

A sheriff’s deputy was dispatched last week to a Florida elementary school after a girl kissed a boy during a physical education class. School brass actually reported the impromptu buss as a possible sex crime, according to the Lee County Sheriff’s Office. …The kiss apparently occurred after two girls debated over whom the boy liked more. That’s when one of the girls “went over and kissed” the boy. The redacted sheriff’s report notes that Haring “stated there were no new allegations of sexual abuse as far as she knew.”

Above and beyond the jaw-dropping idiocy of the education bureaucrats, I have two additional reactions to this story.

1. Why didn’t any girls try to kiss me in PE class? This isn’t right. There should have been redistribution so I got my fair share.

2. What on earth is wrong with Florida. Yes, they have the shame of being the home of the Florida Gators, but I’m talking about more fundamental weirdness. Many posts about government stupidity originate in the Sunshine State, including jack-booted speed trap policy, horrific stories about welfare abuse, and a kid getting suspended from school for having a toy gun.

Read Full Post »

Republicans vs. the Free Market

Over and over again, I tell people to ignore whether politicians have a D or an R after their names. That’s because Democrats sometimes do the right thing and Republicans often do the wrong thing.

My latest example of Republicans doing the wrong thing come from Florida, where GOP politicians decided that free markets should not be allowed to function and that all taxpayers should be put at risk to subsidize hurricane insurance (primarily benefiting upper-income people).

The Wall Street Journal opined today on why this is a mistake.

…evidence continues to build that the state’s taxpayers will get walloped sooner or later. The state’s own hurricane reinsurer now admits its 12-month funding shortfall for claims is $3.2 billion. That estimate is based on the taxpayer-backed Florida Hurricane Catastrophic Fund’s cash on hand, its investment income and the amount banks estimate the fund could raise in municipal bond markets, if needed. Uh-oh. The Cat Fund was supposed to be a reinsurer of last resort but was expanded far beyond a prudent size in 2007, thanks to former Governor Charlie Crist. …Florida consumers will ultimately pay the bill. If the Cat Fund must issue bonds, it levies “assessments”—a code name for a tax—on the state’s property and casualty insurance holders to pay interest and repay principal. Only workers’ compensation and medical malpractice insurance holders are exempt—Mr. Crist’s nod to the tort bar. Lest you think $14 billion is enough, consider that Category 5 Hurricane Andrew caused $26.5 billion in damage in 1992, according to the National Hurricane Center. Wilma, which hit in 2005 as a Category 3, cost $21 billion. If the fund couldn’t pay its claims, some of the state’s insurers would likely go bust. The Cat Fund’s chief operating officer, Jack Nicholson, characterizes that problem as potentially “significant.” He is promoting legislation to reduce the fund’s size and shore up its finances. The time to do that is before the next big one hits, but Florida’s ruling Republicans continue to behave as if this is someone else’s problem.

I’ll go one step farther than Mr. Nicholson. Florida politicians shouldn’t just “shore up” the Fund. They should abolish it.

Private markets should determine the cost of insuring beach houses, resort hotels, and other properties susceptible to hurricane damage.

Yes, small subsidies don’t do as much damage as big subsidies, but you wouldn’t want a doctor to remove only 50 percent of a tumor during a cancer operation. That would be a big mistake, creating a much bigger risk that the growth would return to its original size.

The same principle exists with government interventions. Once politicians decide that it is okay to provide special favors for one group of people (usually big campaign contributors), it is very difficult to limit the size of the handouts.

But the moral of the story is that big government is a mistake – even when (or especially when) bad policy is being imposed by Republicans.

Read Full Post »

Revenge of the Laffer Curve, Part II

An earlier post revealed that higher tax rates in Maryland were backfiring, leading to less revenue from upper-income taxpayers. It seems New York politicians are running into a similar problem. According to an AP report, the state’s 100 richest taxpayers have paid $1 billion less than expected following a big tax hike. The story notes that several rich people have left the state, and all three examples are about people who have redomiciled in Florida, which has no state income tax. For more background information on why higher taxes on the rich do not necessarily raise revenue, see this three-part Laffer Curve video series (here, here, and here):

Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. …Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated. The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only temporarily. …”People aren’t wedded to a geographic place as they once were. It’s a different world,” said New York Lt. Gov. Richard Ravitch. He said last year’s surcharge on income taxes, set to last three years, won’t likely meet expectations. So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing. …State officials say they don’t know how much of the missing revenue is because any wealthy New Yorkers simply left. But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh. Golisano changed his official address to Florida, and Limbaugh, who also has a Florida home, announced earlier this year that he was relinquishing his home in Manhattan. Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes. …And it’s not just the well-known leaving. Nancy Bell is moving her Science First manufacturer of scientific products from the Buffalo site her father founded in 1960 to Florida… “It was the higher tax brackets, the so-called millionaire’s tax” that forced the move, she said. “We feel we have to look to the future … I’m leaving wonderful, wonderful friends. It’s not our first choice. It’s our 100th.” Maryland enacted higher tax rates for wealthier residents in 2008 to boost revenues but income from those taxes is down 6.7 percent so far this year.

Read Full Post »