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Several studies, including the American Legislative Exchange Council’s “Rich States, Poor States” and past reports by Americans for Tax Reform Foundation, have documented the migration of taxpayers from high tax to low tax states in recent years.
These studies exhibit strong evidence that taxes are the single largest factor in interstate migration, compared to factors such as climate, employment, family relocation etc.
Our analysis takes the former methodology one step further. Making use of date from the Internal Revenue Service (IRS), we calculated both the number of taxpayers migrating and the adjusted gross income (AGI) that left the state. That is, we have calculated how much money—in terms of personal income—states lose or gain due to the migration of taxpayers. Our findings confirm previous studies, in which taxpayers leave states with high taxes, unfunded pensions and healthcare liabilities.
Due to the ease of interstate migration, taxpayers can easily avoid higher taxes by moving to another state. Consequentially, there is a significant effect wherein a rise in tax rates can lead to lower government revenues as individuals flee. There are nine states with no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. In 2010 alone, these states gained a net total of over 134,000 new residents; additionally, these migrants brought with them over $6.7 billion of net adjusted income, according to IRS data.
In contrast, the ten states with the highest tax burden: California, Connecticut, Maine, Minnesota, New Jersey, New York, Pennsylvania, Rhode Island, Vermont and Wisconsin lost around 200,921 residents and $7.4 billion of net adjusted income in 2009 alone.
From 2001 to 2010, the ten states with the highest tax burden lost over 2.5 million residents. These residents took with them a staggering $80.03 billion in adjusted income.
During the same period, over 1.45 million migrants moved to the states with the lowest tax burdens, bringing more than $40.1 billion with them. The ten lowest tax burden states are Alaska, Louisiana, Nevada, New Hampshire, New Mexico, South Carolina, South Dakota, Tennesee, Texas and Wyoming. In 2009 alone, these states gained 186,685 new residents and over $4.9 billion in adjusted gross income.
At the same time, states with large unfunded liabilities for public employee health care and pension programs are also losing residents. In particular, workers between the ages of 30 and 40, just entering their prime earning years, are fleeing future higher taxes needed to pay for the unfunded liabilities.
In accordance with the higher tax burden of states experiencing higher out-migration, these states also experience higher unemployment rates. This places their increasing tax burden on an ever-shrinking tax base. Not surprisingly, the top five highest tax states consistently have about .5 percent higher unemployment rates than the five states with the lowest tax burden.
The migration of residents from high to low-tax states has been the biggest issue facing state governments in over ten years. Without significant fiscal restraint as well as reforms in public employee pension and healthcare retirement programs, states with heavy tax and entitlement burdens will continue to see residents leave for lower-tax states, further draining state treasuries.
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- About the Author/The Thomas Jefferson Fellowship
- A Message from Grover Norquist and COGC Executive Director Mattie Duppler
- Overview of Results
- Cost of Government Day Components
- State by State Breakdown
- The Government Spending Burden
- State Tax Increases
- Government Employees
- The Regulatory Burden
- Interstate Migration
- The Debt Ceiling and Budget Control Act of 2011
- The Corporate Income Tax in the United States
- Abundance of Supply: America's Energy Resources