Each year Americans from all parts of the country make the decision to leave their home states looking for greener pastures in others. The destinations aren’t always the same, but one thing is constant, when opportunity arises, Americans move to meet it. The Tax Foundation points out that states are competing with each other for citizens, and that one way they do that is by attempting to offer the best tax rates possible. Vermont led the nation in terms of inbound migration as a percent of total moves in 2017. Using migration data collected by United Van Lines, Margan Scarboro explains:
Vermont, Oregon, Idaho, Nevada, and South Dakota had the most inbound migration in 2017, while Illinois, New Jersey, New York, Connecticut, and Kansas had the highest outbound migration. Nebraska and New Hampshire were balanced, having essentially equal inbound and outbound moves.
There are many reasons why an individual may move, but taxes do play a role. As my colleague Nicole has written in the past,
[T]here is a relationship between taxes and migration. Individuals move for a variety of factors. Climate, job opportunities, family, among others, impact the decision to relocate. Taxes can influence the decision too.
Tax rates and structure affect a state’s economy; states with less burdensome tax structures and lower rates tend to have better economic growth. Increased job opportunities can result from the better economic growth.
It is also possible to envision specific instances where tax rates matter directly. Someone moving to Chicago for a new job could decide to live in Illinois or commute from Indiana. Indiana’s 3.3 percent individual income tax rate could be an encouragement to locate in that state over Illinois’ 3.75 percent rate. An individual moving to the Washington, D.C., area could decide to live in Virginia instead of the District because income taxes are lower. By contrast, of course, an individual moving to Austin, Texas, has limited options for daily commuting outside of Texas.
There are many ways that states can compete with one another for residents, and tax rates and structures should certainly be part of the conversation for states looking to attract new residents.
Read more here.
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