Taxes Fuel Historic American Migration

Taxes Fuel Historic American Migration
December 1, 2005

One of the great stories of modern times has been barely mentioned in the popular print media, has been the subject of no movies, and is rarely discussed on talk radio. Right before our eyes, one of the great migrations in human history is going on, one that has led millions of Americans to move during the past decade.

Specifically, people are fleeing high-tax, big-government states for low-tax havens where they can keep more of their income.

Compare the nine states that do not have a general state income tax with the 41 states that do. According to the U.S. Census Bureau, from April 1, 2000 through June 30, 2004, a total of 1,318,963 native-born Americans moved into the no-income-tax states from those states taxing a portion of people's income. This is net of persons moving in the other direction.



Trend Began in 1990s

This movement of 310,000 persons a year is a continuation of a trend of the 1990s, when about 3 million persons made similar moves. From 1990 to the present, about 4.6 million persons have fled the income tax states--a vastly larger number than moved from East Germany to West Germany in the 15 years before the Communists built the Berlin Wall.

And people have been voting with their feet to avoid all taxes, not just those on income.

For example, my research shows 2,845,700 Americans moved into the 10 states with the overall lowest state and local tax burden in the 1990s, from other states. Meanwhile, there was a net out-migration of 2,151,300 from the 10 states with the highest tax burdens.



California Lost 2 Million

A good case study is California. For well over a century, the cry of "Go West, Young Man, Go West" led literally millions of Americans to move to the Golden State. In the 1990s, however, the migration reversed. More than 2.1 million native-born Americans left California net of those moving in.

More left California than even high-tax New York, the perennial leader in tax-induced brain drain.

In 1990, California passed the largest state tax increase in American history, increasing both the income and sales tax substantially. While such rival Sun Belt states as Florida and Texas still attracted vast numbers of native-born Americans with their lower taxes (including no income tax), California lost some of its most productive citizens.



Studies Confirm Tax Effect

The skeptical reader might say people left high-tax states for reasons other than taxes, and moved into low-tax states for non-tax reasons. While it is true many non-tax factors influence migration, more sophisticated econometric analysis confirms that, controlling for other factors, the negative tax-migration relationship exists. The relation holds if international migration (immigration) is taken into account as well.

Recently, some scholarly studies have confirmed the aversion of migrants to taxes for specific age groups. For example, a recent study from the prestigious National Bureau of Economic Research concluded, "this evidence is consistent with the notion that wealthy elderly people change their state of residence to avoid high state taxes."

Migration is probably the best measurable indicator of human well-being. People move to find conditions conducive to a better life. The tendency to move to areas with relatively low taxes suggests that on balance migrants believe life is better where individuals are free to spend a larger share of the money they earn in a manner of their own choosing.


Richard Vedder (vedder@ohio.edu) is a distinguished professor of economics at Ohio University and policy advisor to The Heartland Institute.