High-Tax States Lost Residents to Low-Tax States in 2018

April 25, 2019 Updated: April 25, 2019

States with the highest tax burden have generally lost residents in 2018, while states with the lowest tax burdens have gained residents.

Of the 25 states with the highest taxes, 15 have lost residents in 2018; of the 25 with the lowest taxes, only five had a decline in population, according to tax burden data collected by WalletHub, and migration data from the United Van Lines moving company. The migration data was missing for Alaska, Hawaii, and West Virginia.

The four states with the greatest population losses were Illinois, Connecticut, New Jersey, and New York—Nos. 9, 8, 7, and 1, respectively, on the tax burden list. The lone high-tax state gaining in population is Vermont. The migration data doesn’t provide absolute numbers, but compares the ratio of people moving in versus out of each state. The tax burden data combines property tax, individual income tax, and sales and excise taxes.

Continuing Trend

The migration trend isn’t new. Between 2005 and 2016, New York lost almost 1.9 million residents, California (No. 11 at the tax burden list) lost more than 1.6 million, Illinois lost more than a million, and New Jersey lost more than 800,000, according to the “Rich States, Poor States” report by the American Legislative Exchange Council (ALEC), a conservative nonprofit.

The states that gained the most in population were Texas (more than 1.4 million, 33rd on the tax burden list) and Florida (more than 1.1 million, 47th on the list).

Tax-Cut Effect

President Donald Trump’s tax cuts have likely contributed to the trend or may contribute in future years by capping the deductions of state and local taxes, meaning residents of high-tax states have to pay more in federal taxes. The cap especially hit the rich in so-called blue states.

The average federal tax for a New York millionaire went up by about $200,000 under the new legislation, according to Rachel Greszler, a research fellow at the Heritage Foundation.

Lower Taxes, Better Economy

The ALEC report found links between the lower-taxed and less-regulated economies and greater economic prosperity, pointing to examples such as Florida, which had nearly 300 percent more jobs in 2017 than 1970, and, in 2014, overtook New York as the nation’s third most populous state, behind California and Texas.

“Many states have witnessed benefits like higher in-migration and economic growth after lowering corporate and personal income tax rates, reducing or eliminating death taxes, simplifying tax codes, and supporting worker freedom,” the report stated.

Effect on Congress

Jonathan Williams, chief economist at ALEC and one of the authors of the report, pointed to the political ramifications of the migration patterns.

“When you look at these population flows, they have obviously a direct relationship with how states are winning or losing in terms of political representation in the U.S. House,” he said.

“And biggest winners of 2020 are likely to be Texas and Florida,” he noted, each of which may get at least two additional House seats in 2020. On the other hand, Illinois and New York may each lose one or two seats, at least.

Emel Akan contributed to this report.

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