Moving away from taxes

Moving away from taxes

It’s a form of tax osmosis. A Wall Street Journal editorial speculates that a survey of Americans’ patterns of migration are evidence that taxes affect people’s behavior. Citing data from a survey by moving company United Van Lines, the WSJ points out that the top “departure” states have among the highest taxes in the country while the top “destination” states have the lowest taxes, especially personal income taxes.

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.

Here’s another example. The only Pacific Coast state to lose migrant population in 2007 was California, which has the highest state income tax in the nation. This is the continuation of a dismal 10-year performance with nearly one and a half million Golden Staters leaving what was once the premier destination state in America.

Meanwhile, next door, Nevada was second among the states in new families — and a big percentage of the new arrivals are Californians. Nevada has no income tax. High income Californians can buy a house in Las Vegas for the amount of money they save in three or four years by not paying California income taxes.

They note that in the Northeast, New Hampshire was the biggest gainer, although Vermont is a high-tax exception.

Another data point is the cost of moving. Renting a U-Haul from Los Angeles to Austin costs four times as much as moving the other way, for example, which reflects the low supply and high demand in Los Angeles versus Austin.

As the editorial acknowledges, there are many reasons people move: housing costs, the job market, climate, quality of life. But these patterns might indicate that the tax burden in a particular place is one of the big reasons. Certainly, tax burden can also affect some of those other factors as well.