Interstate Migration: Big Tax, Big Loss

The Census Bureau has released its interstate migration data for 2019. It is an interesting data set, telling us a great deal about how Americans make good use of their freedom to migrate across state lines to escape unfavorable economic conditions. It is easy to match this migration data with economic factors, such as tax burden and jobs creation.

We are, of course, going to look at all these variables and see how they compare to migration flows. First, though, a quick look at how people actually moved between the several states in 2019. Figure 1 reports the migration net – inflow less outflow – as a share of the total migration volume, in other words inbound migration plus outbound migration, across a state’s borders. For example, 190,627 people moved to Illinois in 2019, while 308,179 people left the state. The net flow, -117,552, is equal to 23.6 percent of the total migration flow.

As Figure 1 explains, the states that had the largest net outflow are almost entirely associated with high taxes or big tax hikes. States like New York, Illinois, New Jersey, Hawaii, California and Maryland hardly require any explanation; as for the last one, their Democrat governor Martin O’Malley, who was in office from 2007 to 2015, raised one tax every ten weeks during his tenure. The incumbent Republican governor has not had much room to change that; by comparison, Maryland has fallen behind other, more tax-lenient states.

Alaska makes the negative side of Figure 1 for two reasons: a decline in oil prices – a reason for outbound migration that the Frontier State shares with Louisiana – and big tax hikes. The politicians in Juneau can’t stop talking about higher taxes to plug the enormous hole in their state budget.

Figure 1

Source of raw data: Census Bureau

On the other side of Figure 1 are states like Florida, Wyoming, Nevada, Tennessee and Texas, where there is no income tax. We also find North Carolina on this side, a state that has worked hard in recent years to lower its tax burden.

Further down on the list is Utah, the state that has led the country in economic growth over the past decade. Other states are more of a mystery; who moves to Oregon these days? The answer lies in a closer look at from what states people move to Oregon. The fact of the matter is that Oregon has its southern neighbor to thank for its migration surplus: with 17,000 Oregonians leaving for California in 2019, 38,000 Californians moved north. This 21,000 surplus was 50 percent larger than the total migration net for Oregon.

In other words, had it not been for California, the Beaver State would have ended up with a 7,000 net migration loss.

Again, there are some obvious economic factors associated with interstate migration. Jobs creation tends to be the big one, but tax policy is also important. In a coming article I will compare interstate migration in 2019 to these economic factors; for now, let us go back one year and look at 2018. Figure 2 compares net state migration to the creation of private-sector jobs, but the net migration is reported differently than in Figure 1. To make for a stronger comparison to key economic variables, the migration net is divided by total state population (right vertical axis in Figure 2).

To facilitate the reporting of data, states are clustered into quintiles. The correlation is compelling: the ten states with the highest migration net – Column I – also had the largest jobs creation. By contrast, states that lost jobs saw insignificant net inbound migration, or lost population to other states.

Figure 2

Sources of raw data: Census Bureau (migration); Bureau of Labor Statistics (jobs)

We can expect similar numbers for 2019.

As for 2020, it will be interesting to compare interstate migration to the levels of covid-19-related shutdowns of businesses in the several states. A guess, based solely on anecdotal evidence, is that the population drain from California and New York was exacerbated by the extreme levels of restrictions. By contrast, we should not be surprised to see a state like South Dakota gain population.

In a Special Report, we will take a closer look at how interstate migration compares to taxes, income flows and other key economic factors. Our Special Reports are available free of charge to subscribers to our weekly Economic Newsletter. Subscribe today for $2.99/month and join a growing readership with exclusive access to independent economic analysis!

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  1. Pingback: Interstate Migration: People and Income | The Liberty Bullhorn