Americans move around the country to take a new job, to be with family members, to find a place with cheaper housing or a lower cost of living or to enjoy a better climate. But according to a new study by the liberal-leaning Center on Budget and Policy Priorities, they rarely move to escape high taxes.
The study by Michael Mazerov, a senior fellow with the center's state fiscal project, concludes that interstate migration is small and declining and that state tax structures have had “a negligible impact on Americans’ interstate moves.”
“Differences in tax levels among states have little to no effect on whether and where people move, contrary to claims by some conservative economists and elected officials,” he wrote.
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This may come as news to many Republican governors and GOP-dominated state legislatures across the country that have pushed through tax cuts in recent years to encourage residents to stay put – or to entice others to move to their states.
Mazerov insists that Americans for decades have been moving away from the Northeast, the industrial Midwest and the Great Plains to the South and southwestern states irrespective of overall tax levels or the presence of an income tax. He said they have moved in large part for job opportunities in the Sunbelt states and – secondarily – for cheaper housing or a warmer climate.
“Accordingly, policymakers in states like Kansas, Michigan, Nebraska, Ohio, and Wisconsin that have already cut or are considering cutting their income taxes should harbor no illusions that such a move will stem — let alone reverse — their states’ longstanding net out-migration trends,” he wrote. “To the contrary; if deep tax cuts result in significant deterioration in education, public safety, parks, roads, and other critical services and infrastructure, these states will render themselves less — not more — desirable places to live and raise a family.”
One of those governors, Sam Brownback of Kansas, extolled the virtues of his state’s tax cuts that took effect in early 2013 during an appearance on Thursday at the Heritage Foundation in Washington. Brownback boasted that the tax cuts created jobs and boosted his state’s economy, according to one report. However, his state’s April revenue collection fell $92 million short of forecasts while Moody’s downgraded the state’s credit rating after concluding the Kansas economy was “sluggish” compared to other states, according to the Kansas City Star.
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Mazerov argues that policymakers in most relatively high-tax states “still have considerable room to increase income taxes on the affluent” before they should worry about the potential effects on migration.
His report is an important contribution to a long standing debate about the motivations and economic implications of U.S. migration patterns – as well as the efficacy of tax cuts in stemming the tide of out-migration. Mazerov’s findings are also fighting words to some conservatives who have long championed tax cuts and insist that – at least on the margins – many Americans decide to move from one state to another to escape higher income, sales and property taxes.
Lyman Stone of the conservative Tax Foundation writes, “There is a grain of truth” to CBPP’s position. “People move for many reasons, and taxes are only one of many influential factors,” according to Stone. “Recent Gallup polls find that taxes in some states generally matter less than some factors like weather, family, jobs, quality of life, or education. However, in some states, taxes are a major factor: like New York, Illinois, Maryland, and Connecticut.”
“What we’ve consistently argued at the Tax Foundation is that taxes matter on the margin, but that they’re just one of many factors. After reviewing Mazerov’s main arguments, this theme will be apparent: that his analysis doesn’t address the effect of taxes on the margin.”
Related: The 10 Worst States for Taxes in 2014
Here are the highlights of Mazerov’s findings, which he based on a review of Census and Internal Revenue Service data on interstate migration, as well as academic studies:
Relatively few Americans relocate from state to state, and a miniscule share of them report that they moved because of taxes. Nearly 70 percent of Americans born in the U.S. still reside in the state in which they were born. A mere 1.5 percent to 2 percent of residents relocated across state lines each year – and that rate appears to be declining. And most of those who make the interstate move cite employment factors or family-related reasons. Few list the “other” category that would encompass lower taxes.
People who do move are nearly as likely to move from low-tax states to high-tax states as in the other direction. Over the past 20 years, for example, more households moved from Florida, which has no income tax, to Georgia, North Carolina and nine other states with income taxes than households in those 11 states moved to Florida.
Mazerov can’t say from the data he reviewed how many of the people who moved from Florida to those 11 other states were subject to paying state income tax on all or part of their income – although he suspects many were. Based on the average income of those who made the move, he said, “I’m pretty confident” many of them were subject to state income taxes.
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Even in Northeastern and Great Lakes states that do levy income taxes and that have consistently experienced net out-migration in recent years, most of the people moving out are replaced by people moving in. By far, New York experienced the highest net out-migration of any state between 1993 and 2011. But even in the Gotham State, households moving in from other states replaced two-thirds of those who left the state. The remainder were replaced by international in-migration and new births.
Although the study offers only limited demographic information about the population shifts, the two-thirds of the New Yorkers who left the state were not replaced by an economically comparable group of newcomers, according to Mazerov. The average adjusted gross income of the people who moved out was $62,000 a year while the average income of the people who replaced them was roughly $54,000 – a 13 percent gap.
“So clearly on average the people who moved out had higher incomes,” he said. “But even there, it’s not an enormous gap. . . . On average the people moving out are probably later in their careers than the people moving in – and their incomes reflect it.”
“It’s people of all income levels and all different employment statuses and different ages and every other kind of demographic,” said Mazerov. “We know that young people – people in their 20s and 30s – are the most mobile people in general. And we know that college graduates and people with college degrees are more mobile than people without them. There’s a national labor market for their skills.”
Related: You Won’t Believe Which State Taxes Its Poor the Most
Primarily low and moderate income households, not high-income households, are migrating to states without income taxes. For instance, of those who moved from New York to Florida between 2008 and 2012, more than three times as many had incomes below $50,000 as above $100,000, and these distributions are similar to the overall state population.
Housing costs are much more of a factor in moves from states like New York and California to states like Texas and Florida than the relative tax burden. Taxes are far less consequential than housing costs for most families that made the move. For example, a typical family with a $75,000 income that sold its home in Los Angeles in 2010 and bought one in Las Vegas or Houston saved two-and-a-half times as much in mortgage payments (not counting property taxes) as they saved in state and local taxes. The same family moving from New York City to Miami would have saved more than three times as much in housing costs – not counting property taxes -- as in state and local taxes.
| Majority of Households Leaving States Experiencing Out-migration Are Replaced by Households Moving In (1993-2011) |
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| State | Households Moving In |
Households Moving Out | Share of Departing Households Replaced by New Arrivals |
| New York | 2,255,985 | 3,305,256 | 68.3% |
| Michigan | 997,761 | 1,357,506 | 73.5% |
| Illinois | 1,687,220 | 2,124,874 | 79.4% |
| Ohio | 1,349,461 | 1,681,673 | 80.2% |
| New Jersey | 1,371,140 | 1,700,408 | 80.6% |
| Connecticut | 623,463 | 758,947 | 82.1% |
| California | 3,738,367 | 4,505,949 | 83.0% |
| Louisiana | 665,534 | 788,215 | 84.4% |
| Rhode Island | 220,320 | 259,339 | 85.0% |
| Massachusetts | 1,107,443 | 1,286,269 | 86.1% |
| Iowa | 500,053 | 572,818 | 87.3% |
| North Dakota | 164,649 | 186,815 | 88.1% |
| Pennsylvania | 1,629,841 | 1,844,709 | 88.4% |
| Nebraska | 347,195 | 388,386 | 89.4% |
| Kansas | 638,916 | 697,917 | 91.5% |
| Hawaii | 382,115 | 412,721 | 92.6% |
| Wisconsin | 749,225 | 805,864 | 93.0% |
| District of Columbia | 401,834 | 427,268 | 94.0% |
| Indiana | 985,162 | 1,043,919 | 94.4% |
| Alaska | 255,755 | 266,638 | 95.9% |
| Minnesota | 767,414 | 799,198 | 96.0% |
| Vermont | 166,313 | 173,188 | 96.0% |
| Maryland | 1,290,089 | 1,326,004 | 97.3% |
| South Dakota | 195,024 | 200,118 | 97.5% |
| West Virginia | 322,357 | 328,992 | 98.0% |
| Mississippi | 522,109 | 528,788 | 98.7% |
| Source: Internal Revenue Service interstate migration data | |||
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