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Why States Prosper (or Decline)
Low taxes, opportunity, and warm weather attract migrants.


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Stephen Moore

Finally, after being headquartered in Torrance, Calif., for half a century, Toyota has had enough of California’s anti-business, anti-growth policies and is packing its bags and moving to Plano, Texas, where the contrast couldn’t be greater. And Toyota is not alone in fleeing California.

You can tell a lot about the hot spots in America by tracking where Americans are moving to and where they are running from. Every year, about 3 million Americans move from one state to another; the combined adjusted gross incomes (AGI) of these movers and shakers is over $140 billion. Last week, the IRS released its latest data for tax year 2010 (filing year 2011) on the migration patterns of Americans and how much income they bring into and out of each state. The new report is an eye-opener, and we only hope those who are talking wistfully about 80 percent tax rates will pay attention. It has been true for a long time that taxes redistribute people, not wealth — and it’s never been truer than it is today.

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One thing we can discern from these data is that Americans are still highly attracted to warm weather and sunshine: Florida, South Carolina, and Arizona were the three biggest winners in terms of net increase in income from new arrivals. But a 70-degree temperature and blue skies aren’t the only factors moving people around. In percentage terms, states like Wyoming, South Dakota, and Idaho were big winners too.

The policy conclusion that leaps off the pages from these interstate-migration patterns is that Americans are voting with their feet against liberalism — high taxes and debt, heavy regulation, and union domination. Look at the ten states that lost the most adjusted gross income on net (meaning the AGI of leavers minus the AGI of new entrants, divided by the AGI of the state’s non-migrants):

States with the Largest Loss of AGI Due to Domestic Migration as a Share of Total State AGI, Tax Year 2010 / Filing Year 2011

Rank State 1-year
Change in
AGI due to
Domestic
Migration
50 New York –0.64%
49 New Jersey –0.64%
48 Illinois –0.63%
47 Rhode Island –0.57%
46 Ohio –0.53%
45 Alaska –0.53%
44 Michigan –0.52%
43 Kansas –0.35%
42 Missouri –0.32%
41 Iowa –0.32%

These numbers may look small, but they’re actually substantial losses: Once a person has left a state, he usually stays gone for quite a while. While the numbers reported are for only one year, if these trends hold up over a decade, these states could surrender between 5 and 10 percent of their total income to other states.

What do these losers have in common? Well, the four biggest losers are about the most politically liberal states in the nation, and the sixth biggest — Alaska — is ridiculously cold and dark.



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