The Great Migration

Recent trends indicate a significant movement of residents from high-tax states to those with lower tax burdens across the United States. The period from April 2020 to June 2023 saw approximately 2.8 million individuals migrating from states with elevated tax rates like California, New York, Illinois, and New Jersey to more tax-friendly environments, including Florida, Texas, North Carolina, Arizona, and Tennessee.

Top Destinations for Movers

Among the states that have benefited from this population shift, Florida and Texas emerged as the primary destinations. These states, known for having no state income tax, gained a net influx of:

• Florida: 819,000 residents
• Texas: 656,000 residents

In addition, North Carolina, South Carolina, Arizona, and Tennessee also saw substantial gains, with respective net increases of:

• North Carolina: 310,000 residents
• South Carolina: 248,000 residents
• Arizona: 218,000 residents
• Tennessee: 207,000 residents

Notably, Tennessee aligns with Florida and Texas in boasting zero income tax, further enhancing its appeal.

Impact of High Taxes on Migration

California, which ranks as the state with the highest income tax rate at 13.3%, has been a major contributor to this migration phenomenon, losing around 1.2 million residents during the same time frame. The majority of those departing have headed to states such as:

• Texas
• Arizona
• Nevada

This trend underscores that high tax rates can significantly influence where people choose to live and work.

New York’s Migration Patterns

New York holds the second highest income tax rate at 10.9%, contributing to a net loss of about 883,000 residents. Many New Yorkers are relocating to Florida, Texas, and North Carolina, drawn by the promise of lower overall tax burdens. Interestingly, even neighboring states like Pennsylvania and Connecticut are seeing an influx, even if their tax rates are not as low as those of the aforementioned states.

Broader Implications of Migration Trends

The impact of taxation on migration isn’t limited to high-income residents alone; it spans all income brackets. Individuals across various economic levels are moving from high-tax states to those with lower tax structures. This trend suggests that the supposed benefits funded by higher taxes, particularly for low- and middle-income households, may not be achieving their intended outcomes.

State lawmakers should consider the potential consequences of increased tax rates on their tax bases. Excessively high taxes may prompt an exodus of those who contribute significantly to state revenues—an outcome that could be detrimental to state funding and service provision.