Voting with Our Feet

There are many factors that determine whether the population of a specific area in the U.S. will grow or shrink. Obviously, people move between states in search of better jobs or schools, or for more affordable housing, or for warmer or drier weather.

But a major reason for the migration taking place within America is often overlooked. Quite simply, people move toward states with lower taxes, and away from states with higher taxes.

An analysis by economist Brian Wesbury¹ of the Census Bureau's 2007 population growth data, plotted against the Tax Foundation's measure of state tax burdens, yielded the inescapable conclusion that higher taxes are linked to slower population growth.

A state tax burden is defined as the total of all the state and local taxes that businesses and individuals pay, as a percentage of their total income.

As Wesbury notes, taxes make a big impact on the decisions people make when they are thinking about where to retire. Taxes also affect the decisions executives make about where to locate a business or expand it. States with lower taxes allow businesses to keep more of their profits and allow employees and retirees to keep more of their income.

In 2007, 8 million Americans moved to a different state. That works out to 20,000 people crossing state lines every day, which is a record number.

A survey by the moving company United Van Lines, found that Michigan's population had fallen the fastest last year, with twice as many families moving out of state as families moving in. New York, New Jersey, Ohio, Pennsylvania, and Illinois also saw population declines.

So where are Americans moving to? Among the most popular destinations are Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

What do these eight states — which are both literally and figuratively "all over the map" in terms of location, weather, cultural opportunities, and housing prices — have in common?

Just one thing: None of them has a state income tax.

All eight of these states are growing in population, at the expense of other states that do tax their residents. As The Wall Street Journal² notes, North Dakota and South Dakota are very similar in every way, yet North Dakota ha... To read the full article, you must be a Trends Magazine Subscriber. To learn more, click here