As we have long known, all other things being equal, people tend to flee unexempt, high-tax environments in favor of more free, low-tax environments. Other factors also play a role; Opportunity, weather, cost, family—these are all factors to consider for those contemplating a move. But people constantly show a strong affinity for living alone and keeping what they earn.
So, what happens when it becomes possible for more people to choose to live independently where their jobs are geographically based, such as when a global pandemic helps normalize remote work? It turns out that many flee more enthusiastically from unfettered, high-tax environments.
“Millions of people have moved during the pandemic, driven by the opportunity to work remotely, the desire for more space and better affordability,” Nadia Evangelo, senior economist at the National Association of Realtors, wrote on Jan. 30. An influx of people, with more people moving in than out, while twenty-five states lost movers … California (-343,230), New York (-299,557), and Illinois (-141,656) experienced the largest net inward outflows.”
California, New York and Illinois lost the most people in raw numbers in 2022, but they were each in the top ten in terms of the net percentage of population leaving the state. New York lost 0.9 percent, Illinois lost 0.8 percent and California lost 0.3 percent (tied with Pennsylvania, Mississippi and Rhode Island).
All these states have something else in common: high tax burdens. “Tax burden measures the proportion of total personal income that residents pay for state and local taxes,” notes WalletHub, which ranks states by measure. Using an assessment based on property taxes, personal income taxes, and sales and excise taxes, WalletHub ranks New York as the nation’s highest-taxed state, followed by California at ninth and Illinois at No. 10.
All three states share another characteristic: they are somewhat control freak-y. The Cato Institute uses a broad combination of scores for personal freedom, fiscal policy and regulatory policy Independence in 50 states It ranks states based on the environment they offer for those who care about entrepreneurship, sexual freedom, gun ownership, homeschooling, and some combination of the like. New York had 50 of the dead, California 48 and Illinois 37.
“Illinois used to be a relatively modest state for economic freedom, although it almost always did much better on fiscal policy than on regulatory policy. But the state has lost some of that edge and, not surprisingly, some of its economic vitality,” the editors ranked the best of the three. observed “Illinois has long been our bete noire on personal liberties, but that has changed dramatically with federal court decisions that have struck down some of the most extreme restrictions on gun rights, the legalization of same-sex marriage, marijuana reform, and the availability of driver’s licenses to people without a Social Security number. “
This improvement in personal freedom appears insufficient to alleviate those turned off by erosion of economic freedom and high taxes, net of 141,656 residents who sought new lives elsewhere.
Considerations besides taxes and freedom must drive people’s decisions about where to live. Affordability, climate, family, amenities, and job opportunities weigh heavily on people’s minds when deciding where to locate themselves.
“While high earners may have the most to lose from higher income taxes, they are also, by definition, high earnerWhich means there’s probably a good job closer to where they live,” demographer Lyman Stone wrote for the Tax Foundation in 2014. “The higher your income, the less likely you are to open a job in another state that could increase your income.”
Stone believed that taxes were more likely to motivate immigration among people seeking to improve their conditions than among those already doing well.
Since then, though, a little thing called COVID-19 has come along and normalized office work from places other than spaces rented by employers. The remote work revolution hasn’t affected all jobs by any means—many people still have to show up to get things done. And some employers want workers back in the office. But there certainly are many white-collar workers was They have the flexibility to work wherever they want and some of it will be permanent.
So, this should spell good news for places like Hawaii, where Internet connections come in proximity to beaches and sunshine, right? Not too much. The Aloha State sees a net out-migration of 15,212 people in 2022, or 0.5 percent of its population. That may have something to do with the nation’s second-highest tax burden and rank of 49 out of 50 states for freedom. . As an archipelago that relies on necessities, it is also a very expensive place to live.
People can always enjoy the prices, relatively approved laws, and tax rates for their daily lives and save their visits to Hawaii for vacations.
Correlations persist between states with lower taxes and greater freedom and those that move people per. Among the top-10 states for immigration in terms of both net raw numbers and percent population growth, five ranked among the 10 with the lowest tax burdens; all The bottom half is for tax burden. Also, among the top-10 states for immigration in both net raw numbers and population growth, five ranked among the nation’s 10 most free states; Only Delaware (1.4 percent net population growth) ranked 44th among the 20 least liberal states.
Of the ten states with the lowest tax burden, only Alaska lost population (eight of the ten states with the highest taxes lost population). Among the ten most-free states, only Michigan lost population (eight of the 10 least-free states lost population).
There is a lot to parse, and many competing reasons for why people move from one place to another. Even among tax burden and freedom rankings, some people will emphasize one tax rate over another, or dismiss a state that otherwise ranks well in overall freedom because it does poorly in areas important to them. And that’s before moving on to other important concerns like job opportunities, family, climate, culture and cost.
That said, all things being equal, it’s clear that states that are settled and sticky-fingered have a harder time attracting people than states that generally leave people alone to run their own lives and keep relatively large chunks of their own money.