Americans Moved to Low-Tax States in 2022

Americans were on the move in 2022 and chose low-tax states over high-taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ones. That’s the finding of recent U.S. Census Bureau population data and commercial datasets released this week by U-Haul and United Van Lines.

The U.S. population grew 0.4 percent between July 2021 and July 2022, an increase from the previous year’s historically low rate of 0.1 percent. While international migration helped numbers on the national level, interstate migration was still a key driver of state population numbers. New York’s population shrunk by 0.9 percent between July 2021 and July 2022, Illinois lost 0.8 percent of its population, and Louisiana (also 0.8 percent), West Virginia (0.6 percent), and Hawaii (0.5 percent) rounded out the top five jurisdictions for population loss. At the same time, Florida gained 1.9 percent, while Idaho, South Carolina, Texas, South Dakota, Montana, Delaware, Arizona, North Carolina, Utah, Tennessee, Georgia, and Nevada all saw population gains of 1 percent or more.

This population shift paints a clear picture: people left high-tax, high-cost states for lower-tax, lower-cost alternatives.

The individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. is illustrative here (though only one component of overall tax burdens, it is often highly salient). In the top third of states for population growth (including D.C.), the average combined top marginal state income tax rate is about 4.0 percent. In the bottom third, it’s about 6.6 percent.

Six states in the top third forgo taxes on wage income (Florida, Texas, South Dakota, Tennessee, and Nevada, as well as Washington, which taxes capital gains income but not wage income), and the highest top rate in that cohort is Maine’s 7.15 percent. Among the bottom third, five jurisdictions—California, Hawaii, New Jersey, New York, and Oregon—have double-digit income tax rates, and—excepting Alaska, with no income tax—the lowest rate is in Pennsylvania, where a low state rate of 3.07 percent is paired with some of the highest local income tax rates in the country. Six states in the bottom third have local income taxes; only one in the top third does.

The Census data shows population gains and losses, but not cross-border migration. (The Census provides migration data but on a longer time delay.) Moving data from U-Haul and United Van Lines, while less robust—and undoubtedly influenced by their geographic coverage—speaks more directly to cross-border migration and is 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 largest net gainers.

Low-Tax States Saw More Population Growth and Higher Inbound Migration

Census Population Data (July 2021 – July 2022) and Industry Moving Data (2022)
State	Census	U-Haul	UVL
Alabama	20	20	10
Alaska	37	41	n.a.
Arizona	8	7	20
Arkansas	17	43	18
California	41	50	40
Colorado	19	11	31
Connecticut	31	28	39
Delaware	7	27	5
District of Columbia	(21)	36	7
Florida	1	2	12
Georgia	12	8	19
Hawaii	46	n.a.	n.a.
Idaho	2	10	15
Illinois	49	49	48
Indiana	23	14	22
Iowa	30	21	34
Kansas	33	39	36
Kentucky	28	26	24
Louisiana	48	35	41
Maine	15	29	17
Maryland	40	44	30
Massachusetts	38	47	43
Michigan	34	48	46
Minnesota	29	17	29
Mississippi	44	34	37
Missouri	27	15	25
Montana	6	18	28
Nebraska	24	32	42
Nevada	13	13	26
New Hampshire	18	38	14
New Jersey	35	45	49
New Mexico	39	19	9
New York	50	46	47
North Carolina	9	4	6
North Dakota	26	37	32
Ohio	36	9	38
Oklahoma	14	42	33
Oregon	45	22	2
Pennsylvania	43	24	44
Rhode Island	42	40	3
South Carolina	3	3	4
South Dakota	5	31	8
Tennessee	11	6	11
Texas	4	1	16
Utah	10	12	35
Vermont	32	30	1
Virginia	22	5	21
Washington	16	23	23
West Virginia	47	25	13
Wisconsin	25	16	27
Wyoming	21	33	45
Sources: U.S. Census Bureau; U-Haul; United Van Lines.

These industry studies record total migrations, whereas population data can be put in percentage terms, so large states like Texas—which, according to the Census Bureau, had the most population growth in nominal terms, but fourth-most in percentage terms—show up prominently while smaller states that saw large population surges, like Idaho, are somewhat lower on the list.

Another story from the industry data that is less apparent in Census population data is regional competition, even among comparatively high-tax states. Vermont is first in the United Van Lines data but middle-of-the-pack for overall population change because the state benefited from outmigration from densely populated Northeastern cities.

Similarly, U-Haul has relatively few inbound trips to Oklahoma, New Hampshire, and a few other states compared to United Van Lines and, more importantly, to Census data on population growth. Relatively local moves, such as those within the D.C. metropolitan area, can make a jurisdiction like the District of Columbia look like it is doing very well on United Van Lines data even though the Census data shows much milder growth. The industry data has limitations, but it remains informative.

People move for many reasons. Sometimes taxes are expressly part of the calculation. Often, they play an indirect role (by contributing to a broadly favorable economic environment). And other times, of course, they don’t factor in at all. The Census data and these industry studies cannot tell us exactly why each person moved, but there is no denying a very strong correlation between low-tax, low-cost states and population growth. With many states responding to robust revenues and heightened state competition by cutting taxes, these trends may only get larger.

The pandemic has accelerated changes to the way we live and work, making it far easier for people to move—and they have. As states work to maintain their competitive advantage, they should pay attention to where people are moving, and try to understand why.

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