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, as we explain in a new paper.
For decades, Americans have been moving away from the Northeast, the industrial Midwest, and the Great Plains to most of the southern and southwestern states, regardless of overall tax levels or the presence of an income tax in any state. They’ve moved in large part for employment opportunities in the Sunbelt and, secondarily, for less expensive housing — and, for many retirees, a warmer, snow-free climate.
Several anti-tax advocates have been especially visible and vociferous in advocating state personal income tax cuts, arguing that personal income taxes are leading individuals and families to relocate from the 41 states that levy them (and particularly from those that levy them at somewhat higher rates) to the nine states that don’t have income taxes. They assert that large numbers of people are consciously “voting with their feet” — leaving high income tax states for low- or no-income-tax states largely because they want to retain more of their wages and salaries rather than pay them in state and local taxes.
In fact, relatively few Americans move from state to state (see chart), and few report that they moved because they think their taxes are too high or considered state and local tax levels in deciding where to live. What’s more, overwhelming evidence shows that those cases are sufficiently rare that they shouldn’t drive state tax policy formulation.
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. 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.