Americans were on the move in 2021, and they chose low-tax states over high-tax states. This is the recent observation US Census Bureau demographics, as well as trade datasets released this week by U-haul and United Van Lines.
Nationally, the U.S. population grew only 0.1% between July 2020 and July 2021, the lowest rate since the founding of the nation. The excessive deaths induced by the pandemic, virtually non-existent international immigration and an already declining birth rate have resulted in an almost stable demographic trend nationwide. However, this contradicts the differences at the state and regional level. While the District of Columbia’s population declined 2.8% between April 2020 (roughly the start of the pandemic) and July 2021, New York City lost 1.8% of its population, and Illinois, Hawaii and the California completed the top five jurisdictions for population loss, Idaho gained 3.4%, while Utah, Montana, Arizona, South Carolina, Delaware, Texas, Nevada, Florida and North Carolina all recorded population gains of 1% or more.
The image portrayed by this population shift is a clear picture of people moving out of high tax, high cost states for less tax and less expensive alternatives. Personal income tax is only one component of the overall tax burden, but it is often very important and is illustrative here. If we include the District of Columbia, then in the top third of states for population growth since the start of the pandemic (data from April 2020 to July 2021), the average combined local and top income tax rate is by 3.5%, while in the bottom third of states it is around 7.3 percent.
Six states in the top third waive personal income tax (Florida, Tennessee, Texas, Nevada, New Hampshire and South Dakota) and the highest rate is Maine 7.15%. Among the bottom third, four jurisdictions — California, New Jersey, New York and the District of Columbia — have double-digit income tax rates, and the lowest rate is found in Pennsylvania, where a low rate d The 3.07% state is associated with some of the highest local tax rates in the country. Five states in the bottom third have local income taxes; none in the top third does.
Not content to rest on their laurels, nine states in the top third have implemented or passed personal or corporate income tax cuts in 2021. Only two states in the bottom third have done so, and in one (Louisiana), a proportional base broadening, while good policy, made the reform essentially revenue neutral. Meanwhile, New York and the District of Columbia actually raised income taxes in 2021, the only places to do so.
Census data shows population gains and losses, but not cross-border migration. (The census provides data on migration, but over a longer time frame.) U-Haul and United Van Lines’ travel data, while less robust – and no doubt influenced by their geographic coverage – speaks more directly to cross-border migration and are confirmatory. Both companies see states like California, Illinois, Massachusetts and New York as the biggest losers, while states like Texas, Florida and Tennessee are among the biggest net winners.
|Census demographics (April 2020 to July 2021) and mobile industry data (2021)|
|Alaska||34||16||n / A|
|Hawaii||48||n / A||n / A|
|Caroline from the south||5||4||3|
|District of Colombia||51||35||11|
Sources: US Census Bureau; U-Haul; United Van Lines.
These industrial studies record total migrations, while population data can be expressed as a percentage, so large states like Texas – which the Census Bureau says have experienced the highest population growth in nominal terms, but the seventh in terms of percentage – appear. prominently while smaller states that have seen large population increases, like Idaho, are a little lower on the list. Another story that can be seen in industry data, however, which is less apparent in census population data, is regional competition, even between relatively high-tax states. Vermont is first in United Van Lines data, but in the middle of the pack for overall population change, as the state has benefited from emigration – some temporary, others likely permanent – from densely populated cities. populated in the northeast at the height of the pandemic.
U-Haul has relatively few inbound trips to the Deep South states (see, for example, Alabama and Arkansas) compared to United Van Lines and, more importantly, census data on population growth. Relatively local movements, such as those in the DC metropolitan area, can give the impression that a jurisdiction like the District of Columbia is doing well on United Van Lines data, even if census data tells a different story. . Industry data has its limits, but it’s still interesting.
People move for many reasons. Sometimes taxes are expressly part of the calculation. They often play an indirect role in contributing to an overall favorable economic environment. And sometimes, of course, they play little or no role. Census data and these industry studies cannot tell us exactly why every person moved, but it is undeniable that there is a very strong correlation between low tax, low cost states and the population growth. With many states responding to robust incomes and increased competition from states by cutting taxes, these trends may only worsen.
In early 2020, it was difficult to disentangle preliminary migration data, to determine what was a security-based temporary relocation, and what might be a longer-term move. With census data through July 2021, however, and industry data for all of 2021, we now have a clearer picture of long-term movements. The pandemic has accelerated the changes in the way we live and work, making it much easier for people to move around – and they have. As states strive to maintain their competitive advantage, they need to pay attention to where people are moving and try to understand why.