WILLisms.com: Trivia Tidbit Of The Day: Part 478 -- Voting With Their Feet.

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Trivia Tidbit Of The Day: Part 478 -- Voting With Their Feet.

Americans Fleeing High Taxes-

One of my favorite blogging topics is domestic interstate migration. It is a brilliant and tangible demonstration of policy outcomes. The data just fit what we who cherish free markets might expect to happen when some jurisdictions favor freedom more than others.

The general rule of thumb is that people are leaving high tax states and moving to low tax states. States with no income taxes perform better in all sorts of categories than states with high income taxes.

Last year, a record number (more than 8 million) of Americans packed up and moved from one state to another. Generally, the flow of Americans went from states with high taxes to states with low taxes. Lots of factors are at play when an individual decides to leave home from, say, Illinois, and venture toward, say, Texas. Arctic versus mild weather, right-to-work versus union-stranglehold, decaying versus 21st-century infrastructure, and a host of other factors are involved in the decision.

But it all comes back to taxes. States with high taxes are generally far more dysfunctional in myriad ways than states with low taxes, especially ones without income taxes.

The Wall Street Journal elaborates a bit:

...the eight states without an income tax are stealing talent from other states. They are Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, and each one gained in net domestic migrants. Each one except Florida -- which has sky-high property taxes on new homesteaders -- also ranked in the top 12 of destination states. The nearby table ranks the top five destination and departure states.
Politicians who think taxes don't matter might want to explain the Dakotas. North Dakota ranked second worst in out-migration last year, while South Dakota ranked in the top 10 as a destination. The two are similar in most regards, with one large difference: North Dakota has an income tax and South Dakota doesn't.

Indeed, looking at the United Van Lines data, which, because it includes a sample ("n") of hundreds of thousands, is more useful than one might imagine. I've added plus and minus signs to the states where migration was within the 55% range, for easier visualization of the trend:

Now, compare this data to a generalized tax climate index, and it's pretty clear what is going on:

The regional migration patterns are not an accident. They match the taxation patterns, with a few exceptions here and there.

Could this interstate migration be a metaphor for globalization? Dollars, entrepreneurs and innovators, and large corporations all tend to flow where they are treated nicely. If the United States wants to remain an important player in the global economy into the next century, we've got to take these intranational lessons we can so plainly see and apply them nationally and internationally.

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Previous Trivia Tidbit: Superdelegates.

Posted by Will Franklin · 12 February 2008 01:07 PM

Comments

That was fun and very interesting! Thanks, Will.

Posted by: Zsa Zsa at February 12, 2008 07:23 PM

Generally, when you look at the blue state vs. red states, there is a correlation here to higher taxes and more state control of industry, coupled with a monopoly of labor.(Unions)

Besides that, who wants to freeze their asses off in the winter time?

People and industries moving south is not necessarily a function of labor cost but other factors including state taxes, the cost of state government compliance, the cost of leading a comfortable life.

Brrrr... 62 and sunny here.

Posted by: Eneils Bailey at February 13, 2008 03:52 PM

Couple interesting questions--Chicken or Egg. Do the low taxes spur industry attracting new workers? Or do the new residents spur new industry by coming there?

Regardless, whether these states attract businesses due to their comparatively low taxes, which brings workers drawn by opportunity or whether it is new residents drawn by lower taxes and opportunity that spurs business growth, the results are the same. Low tax states have high GSP growth rates which creates opportunity. Both workers and businesses want to locate there because the low tax climate is favorable to both.

Posted by: Justin B at February 16, 2008 09:52 PM