This is an excellent chart. [Unfortunately, it only enlarges by going to the link below it and enlarging there.] The categories listed in the left-hand column are useful in explaining why people are moving from one state to another. They want to work without having to be taxed by the government or by the unions.
The above chart comes from Mark J. Perry’s article, “America’s Top 10 Inbound vs. Top 10 Outbound States: How Do They Compare on a Variety of Tax Burden, Business Climate, Fiscal Health, and Economic Measures?” The top 5 outbound states you can see from the chart are Illinois, Connecticut, New Jersey, California, and Michigan. The inbound states are Arizona, Idaho, South Carolina, and Tennessee.
In early January of this year, North American Moving Services’ 2017 US Migration Report concluded that the top five inbound states were Arizona, Idaho, South Carolina, and Tennessee and the top five outbound states were Illinois, Connecticut, New Jersey, California, and Michigan.
The reason people move is for economic reasons. Of the Top 10 Inbound states, Nevada had the best growth at 3/3%. California, one of the Top 5 Outbound states, had a 2.10% growth, but the jobs picture in California does not look great.
Let’s review those 10 measures, one-by-one:
1. Right-to-Work. Eight of the top 10 inbound states are Right-to-Work (RTW) states (all except Washington and Oregon), and eight of the top 10 outbound states are forced unionism states (all except North Dakota and Mississippi). According to many studies like this one by my AEI colleague Jeff Eisenach (emphasis mine):
There is a large body of rigorous economic research on the effects of RTW laws on economic performance. Overall, that research suggests that RTW laws have a positive impact on economic growth, employment, investment, and innovation, both directly and indirectly.
Therefore, it would make sense that Americans are leaving states that are more likely to be forced unionism states for greater job opportunities in states that are more likely to be RTW states.
2. State Tax Burden. USAToday recently published a nice summary of The Tax Foundation‘s report “Facts & Figures 2017: How Does Your State Compare?” that analyzes the total tax burden in each state, measured as the percentage of a state’s income that goes to taxes for state and local governments (income taxes, property taxes and sales taxes). The average state total tax burden for the top ten inbound states is 9.1% compared to 10.5% average for the top ten outbound states. The five states with the highest state tax burden (New York, Connecticut, New Jersey, California, and Illinois) all rank among the highest six outbound states. The average rank of 38.5 for the top ten outbound states places those states in the bottom half of US states for the highest total tax burden on average, while the average rank 20.1 for the top ten inbound states places those states in the top half of US states for the lowest total tax burden.
3. Taxes. The average top individual income tax rate in the top ten inbound states is 4.4% compared to 6.6% in the top outbound states. Likewise, the average top corporate tax rate in the top five inbound states is 4.5% compared to 8.1% in the top ten outbound states. It’s an ironclad law of economics that if you tax something you get less of it, and it’s, therefore, no surprise that Americans and businesses are leaving relatively high tax states for relatively low tax states.
4. Forbes Best States for Business. Based on its most recent annual state ranking that measures six business categories: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life, Forbes rated North Carolina ranked as the best US state for business last year. Two of the other states in the top ten inbound states (Utah and Florida) ranked in the top ten best US states for business, and all states in that group ranked in the top half of US states for business climate except Alabama. The average ranking for the top ten states was 16 (top half of US states for best business climate). The average ranking for business climate for the top ten outbound states was 33, placing that group in the bottom half of US states for the worst business climate.
5. Business Tax Climate Rankings. Every year The Tax Foundation creates its State Business Tax Climate Index based on each US state’s corporate income taxes, individual income taxes, sales taxes, property taxes and unemployment insurance taxes. For the most recent Tax Foundation rankings, five of the top ten outbound states (New York, New Jersey, Connecticut, Maryland and California) were among the ten US states with the worst business tax climate and New York, New Jersey and California ranked as the three worst US states. For the top ten inbound states, five of those states (Florida, Oregon, Utah, Washington and North Carolina) ranked among the top 11 US states for business climate. The average ranking for the top ten inbound states is 17 (top half) compared to an average ranking of 34 (bottom half) for the top ten outbound states.
6. State Fiscal Rankings. In an annual study, The Mercatus Center ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pensions and healthcare benefits. According to its most recent report, “The fiscal health of America’s states affects all its citizens. Indicators of fiscal health come in a variety of forms—from a state’s ability to attract businesses and how much it taxes to what services it provides and how well it keeps its promises to public-sector employees.” In its 2017 report, Mercatus ranked Florida (one of the top ten inbound states) as the No. 1 US state for fiscal health, and California, New York, and New Jersey (all top ten outbound states) as the three worst US states for fiscal health. The average fiscal health ranking for the top ten inbound states was 14 (top one-third) compared to an average ranking of 37 for the top ten outbound states (bottom one-third).
7. Economic Performance. The next three categories above show economic performance measures for each of the 20 states for: a) state GDP growth rate in the first half of 2017, b) the state jobless rate in December 2017 and c) employment growth over the most recent one-year period through December 2017. For the top ten inbound states, the average GDP growth rate is 2.2%, the average December jobless rate is 3.9%, and the average job growth rate is 2.2%. In contrast, the figures for the ten outbound states are 1.1%, 4.5%, and 0.9%. In other words, compared to the outbound states, output growth was twice as high in the inbound states on average during the first half of last year (2.2% vs. 1.1%), the average December jobless rate is more than one-half percentage point lower (3.9% vs. 4.5%) and employment growth is more than twice as high (2.2% vs. 0.9%).
Those three important economic indicators suggest that the inbound states on average are stronger economically than the outbound states with faster economic growth, and more robust labor markets with lower jobless rates and greater job creation.
Bottom Line: Based on state-to-state migration data from the Census Bureau for 2016, the migration patterns of US households followed predictable patterns, like my previous analysis, reflecting differences among states in economic growth, tax burdens, business climate, labor market robustness and fiscal health. To answer the questions posed above, there are significant differences between the top ten inbound and top ten outbound states when they are compared on a variety of measures of economic performance, business climate, tax burdens for businesses and individuals, fiscal health, and labor market dynamism. There is empirical evidence that Americans do “vote with their feet” when they relocate from one state to another, and the evidence suggests that Americans are moving from states that are relatively more economically stagnant, fiscally unhealthy states with higher tax burdens and unfriendly business climates with fewer economic and job opportunities, to fiscally sound states that are relatively more economically vibrant, dynamic and business-friendly, with lower tax and regulatory burdens and more economic and job opportunities.
Reprinted here with expressed written permission from Mark J. Perry.
Via Mark J. Perry, Ph. D. and Scholar at The American Enterprise Institute
Professor of Finance and Business Economics
School of Management, University of Michigan-Flint
2111 Riverfront Center, Flint, MI 48502-1950
Michigan Office Phone: 810-424-5413
Washington, D.C. Phone: 202-419-5207
Personal Website: www.umflint.edu/~mjperry
Carpe Diem Blog: www.aei.org/publication/blog/carpe-diem