Americans are fleeing states with high taxes for low-tax states according to recent analysis by John Schoen and CNBC.
By inspecting data from the Federation of Tax Administrators and national moving companies United Van Lines and Atlas Van Lines, a clear link appears between higher taxes and residents looking to relocate. Not surprisingly, these individuals are looking to migrate to states that encourage innovation and economic growth rather than stay in hostile business and tax climates.
Low Taxes Precipitate Population Inflows
As states lower their tax rates, they can expect individuals to flock there for better jobs, higher wages, and greater opportunity. As Travis Brown describes, states with the lowest tax rates like Texas are experiencing booms in their populations under the age of 18 while those states with high tax rates lost a large percentage of their youth population in recent years:
“Many of the states that lost a significant percentage of their under-18 population between 2000 and 2013 are those with fewer opportunities for growth – thanks to high tax rates that discourage innovation and expansion. Ranking at the very bottom, with its youth population decreased by 15.9 percent, is Vermont. Not at all coincidentally, Vermont also levies the nation’s seventh-highest personal income tax rate on its working citizens.”
Predictably, as younger people seek to find new jobs and opportunities, the obvious choice for residency is low-tax states. If states drastically increase the cost of working and living, they will lose their younger population to places that welcome their innovation. Brown claims that these pro-growth states are drawing in the best young talent across the nation:
“Clearly, population grows more quickly in places where work is rewarded and the price on that work is kept low. But the key new piece of information that the 50-State Scorecard shows us is that a large segment of the next generation of American business leaders and innovators are growing up in states that encourage growth.”
Tax Increases Force Exodus of Businesses and Residents
As many states wrap up their legislative sessions and finalize their budgets, the evidence is clear that states that choose tax increases see losses of both residents and businesses. Connecticut recently finalized its budget and passed a $1.2 trillion tax hike that raised income, sales, and corporates taxes. In response, GE and other major companies are looking to relocate and find a state that would welcome their business and jobs them rather than simply hike their tax rates. In addition, the CNBC study shows that Connecticut has experienced a net outward household flow of 58 percent in recent years while also levying some of the highest taxes in the country. This leads one to believe it’s probably not a coincidence.
As states move forward and examine their tax policies, the results are clear. Lower taxes leads to increased migration, population booms, balanced budgets, and economic growth. Higher taxes lead to net citizen and business losses, stagnation, and budget deficits. It appears the choice is a clear one.