TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, January 4, 2019

WSJ: High-Tax State Exodus

Wall Street Journal editorial, High-Tax State Exodus: Growth-Friendly States Gain Population, and It Isn’t Just the Weather:

WSJ TableU.S. population growth fell to an 80-year low last year amid declining birth rates, a new Census report shows. But it’s also telling that some states are booming while others are suffering a European-style sclerosis of population loss and slow economic growth.

One side effect of a strengthening national economy has been a widening disparity in state growth rates. The eight fastest-growing states by population last year were located in the West or South (Nevada, Idaho, Utah, Arizona, Florida, Washington, Colorado and Texas).

And what do you know? These states have also experienced rapid employment and GDP growth spurred by low tax rates and policies generally friendly to business and job creation. Nevada, Arizona, Texas, Washington, Utah, Florida and Colorado ranked among the eight states with the fastest job growth this past year, according to the Bureau of Labor Statistics. Nevada, Texas, Washington and Florida have no income tax.

Florida recorded the highest level of net domestic migration last year and has gained 1.2 million people from other states since 2010. Many Florida transplants are retirees and tax refugees from the Northeast, but businesses of all sorts are also recruiting young workers from other states to serve the state’s booming population that has reached 21.3 million.

Then there’s California. Despite its balmy weather and thriving tech industry, the Golden State last year lost more people to other states than it gained from foreign immigration. Since 2010, a net 710,000 people have left California for other states. One reason is high housing prices, fueled by onerous land and zoning regulations, which have driven out thousands of middle-income families.

Jobs and businesses have also fled the state’s high taxes and regulation. A study this month by business relocation consultant Joe Vranich estimates that 1,800 businesses shifted jobs or capital out of California in 2016 and about 13,000 companies have left the state since 2008. Over the last decade $76.7 billion in capital and 275,000 jobs have moved out of the state.

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The good news for Californians is that people are leaving the state – it's just too crowded. The better news is that there is net in migration at higher income and education levels. California is getting better. But the bad news is that the revolution (secession?) Is that much closer. Albert Hirschman (Exit, Voice & Loyalty) shed much light on these issues – East Germans leaving for West Germany, Irish leaving for England… We will have to see how it turns out

Posted by: C David Anderson | Jan 5, 2019 5:36:58 PM

California - the golden state of millionaire movie stars, hi tech moguls, and millions of illegal hispanic servants and yard service workers. The epitome of total income inequality.

Posted by: ruralcounsel | Jan 7, 2019 3:31:21 AM

Anderson: "California is getting better."

Only due to births, and not births to higher income households. California is losing adults, and has been for years, along with the associated income and property taxes they pay:

And California ranks right behind Washington, DC with the second highest supplemental poverty measure in the entire country:

And California now has the distinction of being the least educated state, with the highest share of adults who never graduated from 9th grade (10%) or high school (18%):

From one California resident to another, presumably, care to comment on those statistics, sir?

Posted by: MM | Jan 8, 2019 1:47:13 PM