In the chart below I used Census data as well as data from the Tax Foundation to compare net migration between U.S. states along with the tax burden from each state. The net migration statistics were based on the years 2010-2014 and compare the number of people who moved into a particular state along with the number who moved out of the same state. If more people move in than move out, there is a net positive migration for that state. If more people are moving out than moving in then there’s a net negative in terms of migration.
The chart shows the top ten states with net positive migration along with the bottom ten (or the ten highest negative migration states). Note that these figures include only domestic migrations, individuals moving from one state to another. They do not include international migration, which of course, can have a significant impact on overall population. However, it can be argued that interstate migrants are going to be the ones most sensitive to differences in state tax rates, particularly, since many migrants are able to avoid parts of the tax system. For example, the U.S. Census Bureau estimates that as of 2010 fewer than one in four (23%) foreign-born residents from Mexico residing in the U.S. was a naturalized U.S. citizen. Many of these individuals will avoid paying income taxes altogether.
So looking at migration within the U.S., we see that during this four year period beginning 2010 the clear winners in terms of positive migration were Texas and Florida, receiving a net of more than 400,000 additional residents over that period. In contrast, at the right side of the chart we see states that saw more people moving out than moving in. At the top of this “moving out” list were New York, Illinois, New Jersey, California, and Michigan.
The other data on this chart relates to the state tax burden of these same states. For each state, the Tax Foundation calculates the average individual’s state and local tax burden, including income, property, sales and other state taxes, and compares that amount to the average per capita (or per person) income. With this calculation, a measure of per capita taxes to per capita income is produced, and the taxes that citizens pay across states can be compared. By this measure, in 2011 (the most recent year available) the average state had a local and state tax burden of nearly 10% (9.8%)
Any of the states with higher average tax burdens will have a low ranking of tax burden, and the states with lower taxes will have higher rankings. For example, during this year New York had the highest average tax rate, of 12.6% of income, so earns the distinction of being number one in terms of highest tax burden among the states. Perhaps not coincidentally, New York is the state with the largest number of domestic migrants moving out during the four-year period of 2010-14. In contrast, among the states shown here, Texas had the lowest tax burden of 7.5% of state income. It was also the state with the largest number of new positive migrants during the same period.
Of course there are many variables that influence a family or individual’s desire to move into or out of a state, and correlation does not prove causation, but the association is clear: higher taxes are correlated with people moving out of states and lower taxes are correlated with people moving in. Using the standard statistical definition of correlation coefficient, we see that the correlation of net migration to tax burden for these periods was about 73%, statistically, a very high level of correlation.
If we look at the 10 states on the left side of the chart with the highest number of net residents to their respective states, only North Carolina and Oregon had higher than average state tax burdens, and only slightly above average. Similarly, among the 10 states on the right side of the chart with net outflows in terms of migrants, only Kansas and Missouri had lower than average rankings in terms of tax burden, and those states did not see significant population losses.
Overall, the trends show domestic migration from the Midwest and northeast to the south. Seven of the states with negative migration are from the Midwest and northeast and seven of the states with gainers are in the South. As of 2014, Florida’s population has overtaken New York, increasing about seven times since 1950. In 2012 the populations of both North Carolina and Georgia surpassed that of Michigan. Although North Dakota was not one of the largest migration gainers during the entire 2010-2014 period, it was the fastest population gainer in 2013-14. Although the oil industry has been a large factor behind its recent growth, the state also has a low tax burden, likely adding to the attractiveness of recent movers to the state.
Underlying these migration trends among states, some of which have existed for many years, are the tax burdens in each state. Only one of the southern states, North Carolina, on this list of top ten positive migration states, had a higher than average tax burden, and none of the Midwest and northeast states with negative migration had a below average tax burden.
As long as tax rates in the southern U.S. are below those elsewhere, migration gains there are likely to continue. In terms of population, an additional advantage the south has over northern states is that it is the largest gainer of international migrants, actually surpassing the 1.3 million in domestic migration gains during the 2010-14 period. Although the northeastern states lost nearly a million domestic movers during the period, the more than 1 million international migrants helped the region become a net gainer of migrants, if only slightly. The Midwest, with about 700,000 in domestic losses, and only 500,000 in international migrants, was a net loser in total movers to and from the region. The West saw a small amount of net migration within the U.S. and about a million in net international migrants, making it the second largest overall net gainer behind the south.