July 16, Dean Stansel, research associate professor at the Bridwell Institute for Economic Freedom at SMU Dallas and the primary author of the Fraser Institute’s annual Economic Freedom of North America report, for a column noting the out-migration losses of heavily taxed states and the in-migration gains of states such as Texas and Florida. Published in the Dallas Morning News under the heading States like Texas that value economic freedom attract a stampede of newcomers: https://bit.ly/36DQbAy
For years now, people and businesses have been pouring over the borders of heavily-taxed California and New York, headed for more freedom-friendly states such as Texas and Florida. The exodus has been so great that when 2020 census numbers were released, both California and New York had lost enough population to cost them a seat in Congress. In contrast, Texas gained two seats, and Florida gained one.
The pandemic slowed the typical summer moving season in 2020, but according to North American Moving Services, California and New York continued to be among the states with the biggest out-migration of residents last year, while Texas and Florida were among those with the biggest in-migration.
Economic freedom explains why people leave California and NY and move to Florida and Texas.
By Dean Stansel
For years now, people and businesses have been pouring over the borders of heavily-taxed California and New York, headed for more freedom-friendly states such as Texas and Florida. The exodus has been so great that when 2020 census numbers were released, both California and New York had lost enough population to cost them a seat in Congress. In contrast, Texas gained two seats, and Florida gained one.
The pandemic slowed the typical summer moving season in 2020, but according to North American Moving Services, California and New York continued to be among the states with the biggest out-migration of residents last year, while Texas and Florida were among those with the biggest in-migration.
That trend seems to be continuing, considering current rental prices of moving trucks. A recent check shows that renting a standard 26-foot U-Haul truck in Dallas and returning it in Los Angeles costs $1,469. Taking one from L.A. to Dallas costs three and a half times more ($5,154).
That higher price likely reflects the far greater demand for rental trucks from people in L.A. to move out than there is from people in Dallas to move to L.A. Taking a truck from Dallas to L.A. is so much cheaper, perhaps because U-Haul needs those trucks returned to L.A. to meet that higher demand. Similar patterns exist for other pairs of cities in our four biggest states.
While there are many factors that go into a decision to move, it is difficult to ignore the stark contrast in public policy approaches between these two pairs of large states. Texas and Florida are two of the eight states that have no state-level personal income taxes, while California and New York impose two of the highest state personal income taxes, with top rates of 13.3% (the highest) and 8.8% (fifth highest) respectively. That’s a substantial chunk of change taken out of people’s paychecks that they get to keep if they move to Texas or Florida.
The Fraser Institute’s most recent annual Economic Freedom of North America report ranks Texas fourth and Florida second. California was 47th and New York was dead last, as it has been for the 11 of the last 12 years. The Tax Foundation’s State Business Tax Climate Index showed a similar contrast: Texas was 11th and Florida fourth, whereas California was 49th and New York 48th. There’s a fairly clear distinction in approach between the high taxes and regulatory burdens of the latter two states and the low taxes and regulatory burdens of the former two.
More specifically, a 10% increase in relative economic freedom was associated with a 27% increase in net in-migration. On average that translates to an increase in net in-migration of 22 people per year from each other metropolitan statistical area (and there are nearly 400 MSAs). Our findings are consistent with similar results in multiple academic papers using state-level data.
Much has changed since the beginning of the pandemic. However, when it comes to moving, Americans continue to vote with their feet in favor of economic freedom, leaving states with high taxes and regulatory burdens like California, New York, Illinois and New Jersey for states with low taxes and regulatory burdens like Texas, Florida, North Carolina and Tennessee.
While there’s always plenty of room for improvement in state policies, even in Texas, that pattern bodes well for the health of the Texas economy in the coming years.
Dean Stansel is a research associate professor at the Bridwell Institute for Economic Freedom at Southern Methodist University and the primary author of the Fraser Institute’s annual Economic Freedom of North America report. He wrote this column for The Dallas Morning News.