Pethokoukis, Economics, Taxes and Spending

State taxes and the Great Income Migration

021212moneywalks

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.

Brown:

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.

15 thoughts on “State taxes and the Great Income Migration

  1. I have read Travis’ book and cannot understand why it has not become mandatory reading material for every American in a position to make a difference in a community, whether it ‘s small-town, USA or a metropolis. This is not just about finance, its about people. Read it. Freakonomics-esq but with IRS data.

    • BO needs to read it. Taxes matter, they have a profound impact on choices and behavior.

      I saw Brown make a very interesting presentation using his computerized tax data that clearly revealed winners and losers based on relative tax differentials between and among the various states.

  2. Put some meat on this post.

    http://interactive.taxfoundation.org/migration/“>Tax Foundation interactive migration data.

    So net migration from California to Texas in the period 2000-2010 was 77000 tax units with AGI of $4.5 billion in constant dollars.

    California 2007 AGI was $1.2 trillion. Even if all interstate migration was 100% tax motivated, it is making a mountain out of a molehill.

    • Even if all interstate migration was 100% tax motivated, it is making a mountain out of a molehill“…

      Mind you marmico that I’m just hazzarding a guess here but ‘if‘ the majority of the movers are moving for tax reasons doesn’t stand to reason they were the money makers (i.e. small and medium business owners) for the state they’re fleeing from?

      So over a period of time and not very much time wouldn’t the loss of these people exacerbate the revenues problem for place like California?

      Orange County Register Dec. ’12: California state revenues 10.8% below budget projections in November

    • So, NET migration over a single decade from California to a single other state was about 0.5% of California’s AGI. That is insignificant?

      NET migration to another single state (Nevada) was over $6.5 billion. Another 0.5%. Arizona? $5.6 Billion – another 0.5%. Etc.

      And that is over just a single decade. And, using 2007 AGI (I guess you wanted to give CA the biggest denominator you could).

      • That is insignificant?

        Yes.

        (I guess you wanted to give CA the biggest denominator you could).

        No. It’s the only IRS AGI data that I could find. Net domestic outmigration from Cali to all other states in the Tax Foundation data base for the 1993-2010 period is $51 billion in $2010 dollars. It’s peanuts (2+ orders of magnitude) relative to Cali AGI in the same period.

        But what we do know is that Cali per capita AGI rose as outbounds had lower per capita income than inbounds.

        • “But what we do know is that Cali per capita AGI rose as outbounds had lower per capita income than inbounds.”

          So what? I have no idea what you think that proves. That the only people willing to move to California already make enough money to afford to live while paying high taxes and cost of living expenses?

  3. they were the money makers

    Maybe, but the 2007 data says the tax unit moving from Texas to Cali had AGI of $55,000 per year and the tax unit moving from Cali to Texas haD AGI of $52,500 per year.

    So the net migration pattern was a smaller number of tax units each with a smaller household size (exemptions per tax unit) with larger incomes moving to Cali.

    • For well over a decade, retirees have been selling houses in California for megabucks and buying less expensive replacements in Nevada, Utah, Arizona and Texas. Long before it became a tv series, “californication” was a term of derision in places like Austin TX or St George UT.

  4. Maybe, but the 2007 data says the tax unit moving from Texas to Cali had AGI of $55,000 per year and the tax unit moving from Cali to Texas haD AGI of $52,500 per year“…

    True for a couple years in fact but overall: ’93 to ’12 California LOST $6.7 billion AGI

    I noticed what appears to be a /political/philosphical pattern regarding which states California gained from: Conneticut, DC, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Wisconsin…

    • what appears to be a /political/philosphical pattern

      Kinda puts sand in the gears of “tax motivated” migration. Are you sure that weather doesn’t play a role in the pattern?

      • Kinda puts sand in the gears of “tax motivated” migration“…

        Hardly… These people know their own…

        Are you sure that weather doesn’t play a role in the pattern?“…

        Oh sure its a possibility, no doubt…

        I have a philosophical bent for warmer climes but if California was somehow the last warm place to move to in the US I’d stay where I am but that’s just me…

      • “Are you sure that weather doesn’t play a role in the pattern?”

        Right on. California can get away with destructive policies that would decimate other areas.

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