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Americans Keep Moving to States with Lower Taxes

March 25, 2019

The Tax Foundation analyzed patterns revealed in the National Movers Study.

Americans continued to migrate from states with more burdensome tax systems to ones with lower taxes in 2018, notes an analysis by the Tax Foundation.

The Tax Foundation compared migration patterns to the structure and level of taxes and regulations as revealed by the more than 100 variables in its 2019 State Business Tax Climate Index.

The Tax Foundation analysis used data in the annual National Movers Study released annually by United Van Lines, the largest moving company in the United States, which reveals relocations among the 48 contiguous states and the District of Columbia.

Where People Move From

Since 1977, United Van Lines has annually reported migration patterns on a state-by-state basis. The 2018 study is based on household moves handled by United and a survey of the company’s clients, states a United Van Lines press release on the 2018 National Movers Study.

The states with the most outbound migration were New Jersey, Illinois, Connecticut, New York, and Kansas, in descending order. Roughly two people moved out of New Jersey and Illinois for each person who moved into the state.

In the Northeast, Connecticut, New Jersey, and New York were among the top 10 outbound states for the fourth consecutive year. In the Midwest, Kansas, Illinois, Iowa, and Ohio saw high outbound relocations as well.

States where inbound migration nearly balanced outbound migration include Arkansas, Maine, and Mississippi, the study found.

Where People Move To

The states with the most inbound migration as a percentage of interstate household moves were Vermont, Oregon, Idaho, Nevada, and Arizona Roughly three people moved into Vermont for each person who left the state, says United Van Lines.

 States in the Mountain West and Pacific West regions, including Oregon, Idaho, Nevada, Washington, and South Dakota, continue to increase in popularity for inbound moves. Arizona joined the list of top 10 inbound states in 2018.

Several southern states also experienced high percentages of inbound migration, such as South Carolina and North Carolina. United Van Lines determined the top reasons for moving south include job change, for nearly half the people moving, and retirement.

Why People Move

The survey showed a leading motivation behind these migration patterns across all regions is a career change, the United Van Lines press release states. About half of the people who moved in the past year moved for a new job or company transfer.

Other reasons for the high percentage of moves to Mountain West states in 2018 include retirement, proximity to family, and lifestyle change. Idaho experienced the nation’s largest influx of new residents desiring a lifestyle change.

More people flocked to New Mexico for retirement than to any other state. In  past decades, the study found California was a popular destination for retirees, but now they are leaving California and moving to other states in the Pacific West and Mountain West.

Young professionals are migrating to vibrant metropolitan economies such as Washington, DC and Seattle, the press release states.

Taxes Play a Role

Taxes are rarely cited as a reason for individual state-to-state moves, but they can certainly factor into relocation decisions, says Katherine Loughead, a policy analyst with the Tax Foundation who wrote “Where Did Americans Move in 2018?”

“A state’s fiscal landscape, including tax structure and burdens, plays a role in the types of employment opportunities available and whether prospective employees would be willing to move to a particular state for a job,” said Loughead.

Comparing the states with the highest percentage of inbound moves to the states with the best scores on the Tax Foundation’s 2019 State Business Tax Climate Index shows significant overlap, says Loughead.

“Five of the ten worst-performing states on our State Business Tax Climate Index are also among the ten states showing the highest outbound moves on this year’s United Van Lines National Movers Study,” said Loughead.

Population and Economic Growth

When it comes to demonstrating the effect of state tax policies, migration patterns provide powerful data to consider, says Loughead.

“States experiencing prolonged periods of outbound migration ought to evaluate how their fiscal landscape might be playing a role and take steps to facilitate a fiscal landscape that invites, rather than deters, investment and long-term growth,” Loughead said.

“For example, tens of thousands of individuals work in greater Chicago but live in Indiana, where many interstate commutes are attributable, at least in part, to stark differences in tax landscape,” Loughead noted in her analysis.

‘Driving Out the Middle Class’

Some states have natural advantages that outweigh the burden of state taxes, says economist Devon Herrick, a policy advisor to The Heartland Institute, which publishes Budget & Tax News.

“California and the southwestern states, and Florida and other southern states, have sunny climates that attract people,” said Herrick. “And coastal states with natural harbors, such as New York City and Los Angeles, have advantages as major hubs of international commerce that could allow them to have more burdensome tax regimes but also have higher incomes,” Herrick said.

Despite those advantages, the higher cost of living, including tax burdens, in some states makes them less attractive to the middle class and retirees, says Herrick.

“States like California and New York are basically driving out the middle class,” said Herrick.

Sarah Quinlan (think@heartland.org) writes from New York City, New York.

Internet Info:

“United Van Lines’ National Movers Study Reveals Americans Are Moving West and South,” press release, United Van Lines, Jan. 2, 2019:

https://www.heartland.org/publications-resources/publications/2018-national-movers-study

Katherine Loughead, “Where Did Americans Move in 2018?” Tax Foundation, January 3, 2019:

https://taxfoundation.org/where-did-americans-move-in-2018/

Jared Walczak, Scott Drenkard, and Joseph Bishop-Henchman, “2019 State Business Tax Climate Index,” Tax Foundation, September 2018:

https://www.heartland.org/publications-resources/publications/tax-foundation-2019-state-business-tax-climate-index