Contrary to common claims that people prefer moving to high-tax states because of accompanying high levels of government services, data compiled by the Internal Revenue Service (IRS) and from experts with the American Legislative Exchange Council (ALEC) find that years of tax migration may be responsible for a resulting decrease in the political power of states with high rates of taxation.
Among the findings of American Legislative Exchange Council‚??s (ALEC)¬†Laffer State Economic Competitive Index, published this year,¬†it was calculated that over 200,000 people left each Northeastern state between 2003 and 2012, Southeastern states experienced an average net population gain of about 300,000 people.
As the delegation of seats in the House is tied to states‚?? population, the political influence of high-tax states contracted, at the expense of pro-growth states elsewhere. Northeastern and Midwestern states suffered the most: New York and Ohio each lost two seats, while eight other states‚?? delegations lost a member.
Eleven states between Maine and Pennsylvania were represented by a total of 141 delegates in 1950, but is now represented by 85 members of Congress ‚?? a 40 percent decrease in proportional representation.
Southern and Western states gained the most proportional representation, cited by experts as a consequence of those states‚?? respective pro-growth policies: Texas‚??s influence over the House of Representatives grew with the addition of 4 delegates. Florida added two Congressional delegates; and Arizona, Nevada, Utah, South Carolina, and Georgia each gained an additional seat at the table.
Also, data from the IRS help illuminates the reasons behind the shifting migratory patterns of taxpayers. Between 1995 and 2010,¬†an analysis of 134 million taxpayer records shows that $2 trillion in net adjusted gross income (AGI) ‚?? along with the taxpayers themselves ‚??
‚??flowed‚?Ě from states with high taxes to states with low taxes.
Ultimately, these migratory patterns take a toll on states with high taxes. New York, for example, lost $58.6 billion during this period, along with talent, wealth, and business prowess that cannot be quantified.
Tale of Two States
Another comparison between the two states‚?? respective trajectories is job growth caused by years of pro-growth policies in Florida, as opposed to the reign of burdensome policies in New York. From 1990 to 2013, the number of jobs in the entire United States increased by 25.3 percent, while job creation in New York floundered at a measly 8.2 percent. Meanwhile Florida‚??s growth outpaced the national average, creating jobs at an astonishing 42.6 percent clip.
New York ranks second for the highest state and local tax burden, a progressive system where individuals can be taxed as high as 12.7 percent and corporations are taxed at 17.16 percent. On the other hand, Florida has no individual income tax and a corporate tax of just 5.5 percent ‚?? a tax climate to which many taxpayers and businesses seem have to been flocking over the years.
The problem of tax migration has been known to state policymakers for many years, and has been studied independently of Laffer‚??s efforts to publicize the implications.
After studying data compiled from the IRS and the National Bureau of Economic Research (NBER), the New Jersey Department of the Treasury concluded that ‚??there has been a small but consistent outflow of population and wealth from the Northeast region to the South since the 1980s,‚?Ě noting that ‚??outmigration associated with higher income taxes will likely diminish other streams of state revenue, such as corporate tax, sales tax, and property tax, as well as degrade a state‚??s overall economic performance, in turn associated with further out-migration.‚?Ě
Alexander Anton (email@example.com) writes from Palatine, Illinois.