Correlation doesn’t prove causality, but it is certainly worth noting the correlation between state income taxes and the flow of income. And thus it is worth reading How Money Walks by Travis Brown, head of a St. Louis-based public affairs and advocacy firm. Using IRS data, Brown has mapped the movement of some $2 trillion in adjusted gross income across America from 1995 through 2010. Among his findings:
1. The nine states with no personal income taxes gained $146 billion.
2. The nine states with the highest personal income taxes lost $107 billion.
3. The 10 states with the lowest per capita state tax burden gained $70 billion.
4. The 10 states with the highest per capita state tax burden lost $139 billion.
To dig a bit deeper, Texas, with no personal income tax and the sixth-lowest state-local tax burden in the US, gained $22 billion. California, with the top marginal income tax rate and the fourth highest state-local tax burden, lost $32 billion.
Incentives matter. Taxes may not be the sole reason Americans moved $2 trillion of their AGI between the states, but there is a clear and unmistakable pattern here: Incomes moved to where taxes were lower.