Taxes

Americans were on the move in 2022 and chose low-tax states over high-tax ones. That’s the finding of recent U.S. Census Bureau population data and commercial datasets released this week by U-Haul and United Van Lines.

The U.S. population grew 0.4 percent between July 2021 and July 2022, an increase from the previous year’s historically low rate of 0.1 percent. While international migration helped numbers on the national level, interstate migration was still a key driver of state population numbers. New York’s population shrunk by 0.9 percent between July 2021 and July 2022, Illinois lost 0.8 percent of its population, and Louisiana (also 0.8 percent), West Virginia (0.6 percent), and Hawaii (0.5 percent) rounded out the top five jurisdictions for population loss. At the same time, Florida gained 1.9 percent, while Idaho, South Carolina, Texas, South Dakota, Montana, Delaware, Arizona, North Carolina, Utah, Tennessee, Georgia, and Nevada all saw population gains of 1 percent or more.

This population shift paints a clear picture: people left high-tax, high-cost states for lower-tax, lower-cost alternatives.

The individual income tax is illustrative here (though only one component of overall tax burdens, it is often highly salient). In the top third of states for population growth (including D.C.), the average combined top marginal state income tax rate is about 4.0 percent. In the bottom third, it’s about 6.6 percent.

Six states in the top third forgo taxes on wage income (Florida, Texas, South Dakota, Tennessee, and Nevada, as well as Washington, which taxes capital gains income but not wage income), and the highest top rate in that cohort is Maine’s 7.15 percent. Among the bottom third, five jurisdictions—California, Hawaii, New Jersey, New York, and Oregon—have double-digit income tax rates, and—excepting Alaska, with no income tax—the lowest rate is in Pennsylvania, where a low state rate of 3.07 percent is paired with some of the highest local income tax rates in the country. Six states in the bottom third have local income taxes; only one in the top third does.

The Census data shows population gains and losses, but not cross-border migration. (The Census provides migration data but on a longer time delay.) Moving data from U-Haul and United Van Lines, while less robust—and undoubtedly influenced by their geographic coverage—speaks more directly to cross-border migration and is confirmatory. Both companies see states like California, Illinois, Massachusetts, and New York as the biggest losers, while states like Texas, Florida, and Tennessee are among the largest net gainers.

Low-Tax States Saw More Population Growth and Higher Inbound Migration
Census Population Data (July 2021 – July 2022) and Industry Moving Data (2022)
State Census U-Haul UVL
Alabama 20 20 10
Alaska 37 41 n.a.
Arizona 8 7 20
Arkansas 17 43 18
California 41 50 40
Colorado 19 11 31
Connecticut 31 28 39
Delaware 7 27 5
District of Columbia (21) 36 7
Florida 1 2 12
Georgia 12 8 19
Hawaii 46 n.a. n.a.
Idaho 2 10 15
Illinois 49 49 48
Indiana 23 14 22
Iowa 30 21 34
Kansas 33 39 36
Kentucky 28 26 24
Louisiana 48 35 41
Maine 15 29 17
Maryland 40 44 30
Massachusetts 38 47 43
Michigan 34 48 46
Minnesota 29 17 29
Mississippi 44 34 37
Missouri 27 15 25
Montana 6 18 28
Nebraska 24 32 42
Nevada 13 13 26
New Hampshire 18 38 14
New Jersey 35 45 49
New Mexico 39 19 9
New York 50 46 47
North Carolina 9 4 6
North Dakota 26 37 32
Ohio 36 9 38
Oklahoma 14 42 33
Oregon 45 22 2
Pennsylvania 43 24 44
Rhode Island 42 40 3
South Carolina 3 3 4
South Dakota 5 31 8
Tennessee 11 6 11
Texas 4 1 16
Utah 10 12 35
Vermont 32 30 1
Virginia 22 5 21
Washington 16 23 23
West Virginia 47 25 13
Wisconsin 25 16 27
Wyoming 21 33 45

Sources: U.S. Census Bureau; U-Haul; United Van Lines.

These industry studies record total migrations, whereas population data can be put in percentage terms, so large states like Texas—which, according to the Census Bureau, had the most population growth in nominal terms, but fourth-most in percentage terms—show up prominently while smaller states that saw large population surges, like Idaho, are somewhat lower on the list.

Another story from the industry data that is less apparent in Census population data is regional competition, even among comparatively high-tax states. Vermont is first in the United Van Lines data but middle-of-the-pack for overall population change because the state benefited from outmigration from densely populated Northeastern cities.

Similarly, U-Haul has relatively few inbound trips to Oklahoma, New Hampshire, and a few other states compared to United Van Lines and, more importantly, to Census data on population growth. Relatively local moves, such as those within the D.C. metropolitan area, can make a jurisdiction like the District of Columbia look like it is doing very well on United Van Lines data even though the Census data shows much milder growth. The industry data has limitations, but it remains informative.

People move for many reasons. Sometimes taxes are expressly part of the calculation. Often, they play an indirect role (by contributing to a broadly favorable economic environment). And other times, of course, they don’t factor in at all. The Census data and these industry studies cannot tell us exactly why each person moved, but there is no denying a very strong correlation between low-tax, low-cost states and population growth. With many states responding to robust revenues and heightened state competition by cutting taxes, these trends may only get larger.

The pandemic has accelerated changes to the way we live and work, making it far easier for people to move—and they have. As states work to maintain their competitive advantage, they should pay attention to where people are moving, and try to understand why.

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