Skip to comments.Why States Prosper (or Decline): Low taxes, opportunity, and warm weather attract migrants.
Posted on 05/10/2014 9:58:03 AM PDT by SeekAndFind
Finally, after being headquartered in Torrance, Calif., for half a century, Toyota has had enough of Californias anti-business, anti-growth policies and is packing its bags and moving to Plano, Texas, where the contrast couldnt be greater. And Toyota is not alone in fleeing California.
You can tell a lot about the hot spots in America by tracking where Americans are moving to and where they are running from. Every year, about 3 million Americans move from one state to another; the combined adjusted gross incomes (AGI) of these movers and shakers is over $140 billion. Last week, the IRS released its latest data for tax year 2010 (filing year 2011) on the migration patterns of Americans and how much income they bring into and out of each state. The new report is an eye-opener, and we only hope those who are talking wistfully about 80 percent tax rates will pay attention. It has been true for a long time that taxes redistribute people, not wealth and its never been truer than it is today.
One thing we can discern from these data is that Americans are still highly attracted to warm weather and sunshine: Florida, South Carolina, and Arizona were the three biggest winners in terms of net increase in income from new arrivals. But a 70-degree temperature and blue skies arent the only factors moving people around. In percentage terms, states like Wyoming, South Dakota, and Idaho were big winners too.
The policy conclusion that leaps off the pages from these interstate-migration patterns is that Americans are voting with their feet against liberalism high taxes and debt, heavy regulation, and union domination. Look at the ten states that lost the most adjusted gross income on net (meaning the AGI of leavers minus the AGI of new entrants, divided by the AGI of the states non-migrants):
States with the Largest Loss of AGI Due to Domestic Migration as a Share of Total State AGI, Tax Year 2010 / Filing Year 2011
AGI due to
These numbers may look small, but theyre actually substantial losses: Once a person has left a state, he usually stays gone for quite a while. While the numbers reported are for only one year, if these trends hold up over a decade, these states could surrender between 5 and 10 percent of their total income to other states.
What do these losers have in common? Well, the four biggest losers are about the most politically liberal states in the nation, and the sixth biggest Alaska is ridiculously cold and dark.
Other big losers include Ohio and Michigan, which have been in decline for many years but seem to be finally turning a corner. Well have to wait for the IRS to release more-current data, but we expect to see Ohio and Michigan beginning to reverse their 50-year-long swan dives. Examining the long-term data going back two decades, we find that these current loser states have typically been found in the bottom of the rankings.
There is no single reason people are leaving these states, but certainly a shortage of jobs is near the top of the list. The losers are also almost all states with very high income-tax rates, and all of them have forced-union rules. These two policy mistakes, as we demonstrate in our new book An Inquiry into the Nature and Causes of the Wealth of States, are serious job killers (Michigan has since become a right-to-work state, but was still a forced-union state during the period covered by the IRS data).
Now lets look at the big winning states in terms of net AGI gains:
States with the Largest Gain of AGI Due to Domestic Migration as a Share of Total State AGI, Tax Year 2010 / Filing Year 2011
AGI due to
Texas and Florida imported by far the most total income from other states, bringing a combined net $7.3 billion into their states in a single year. By the way, both Texas and Florida have no income tax. Neither does Nevada, South Dakota, or Wyoming. Do you think tax rates matter in America?
A new website, SaveTaxesByMoving.com, finds that even middle-class families can save hundreds of thousands of dollars over a working life by moving from a high-income-tax state like California to a zero-earned-income-tax state like Tennessee.
Just so people dont think we are cherry-picking the data here: There are nine states in the U.S. without an income tax, and in tax year 2010, every one of them except Alaska gained income from the other 41 states. This may be a coincidence, but thats highly doubtful, especially since the pattern has sustained itself for many years.
A more reasonable conclusion is that tax rates really do affect incentives and decisions. Barack Obama and the New York Times may long for high taxes, but most Americans would rather avoid them. High taxes are also job killers, so Americans who are unemployed also tend to move away from high-tax states.
Liberals in Washington who want to sock it to the rich have never been able to explain why voters are turning their backs on this big-government model, which has created anything but a workers paradise in the states.
Stephen Moore is the chief economist at the Heritage Foundation. Arthur B. Laffer is the founder and chairman of Laffer Associates and was an adviser to President Reagan. They are co-authors of An Inquiry into the Nature and Causes of the Wealth of States (Wiley, 2014).
problem is the libs, like a virus, are spreading from the hosts they’ve destroyed to a new host which they will eventually destory.
I like to think of liberals as being like a cancer and destory their host. Same thing as mistletoe.
That is correct. But Alaska is not that bad. Why, when summer falls on a weekend we barbecue a moose and have a high old time! Now some people might say that that does not make up for 362 days of darkness and ice but I beg to differ!
If you can't hack it in Alaska (And you know you can't) there are forty nine other little states to choose from. Some of them are pretty good too and all but one of them are easier to get to.
No sane person would move to Alaska. It's too big, too wild, too free. d;^)
California, it is a “tummah”.
“No sane person would move to Alaska. It’s too big, too wild, too free. d;^) “
Accurate, but you have the reason(s) all wrong.
Alaska is a one trick pony - oil, which is in decline. California now produces more oil than Alaska. 90% of the Alaska State income is oil money.
Socialism. Alaska is that now. There is one “non-profit” for every 760 residents. Most feed at the public trough.
OVER 1/2 of the people who do work, are paid with tax money - they work for the Gov’t. More. Than. Half. Oil money goes away - job goes away.
They still want even more - taxes are the fastest rising segment in the Alaska economy. As the oil money dries up, many fools think sales and income taxes can fill in and keep the massive nanny state alive.
MY son moved out last summer, my daughter is looking to move and I have to admit, we will vacation in Texas to look things over. Because when it falls apart, it will be a mess...
All true, of course.
It seems to me, however, that it depends on one’s priorities. With no state taxes, the lowest population density in the country and the best hunting, boating and fishing anywhere, I find Alaska, especially in the mild climate of SE, ideal.
In terms of how I actually live my life I cannot think of any other place that would suit me better.
But I am 65yo and in no great need of a job. We are not raising a family and have no major financial obligations. We don’t care about schools, services, amenities or entertainment opportunities.
OTOH, if I were 40 and willing to take some risks......
“With no state taxes, the lowest population density in the country and the best hunting, boating and fishing anywhere, I find Alaska, especially in the mild climate of SE, ideal.”
The urban areas in Alaska are as crowded or more crowded than many of the l-48 cities. My property tax is plenty high, as much as many major urban areas with crappy school that graduate about 60% of the inmates....
Folks that live in Bush communities have the State pick up the full tab for most everything and token sales taxes are collected, with much howling and fussing.
When I first moved here in 1980, it was a great place - then all the asshats showed up with their hands out....