Migration Patterns

When people decide to relocate, how do they choose a destination? Key factors will include job opportunities, family situations, and lifestyle changes, such as retirement. According to a recent study from the Tax Foundation, income tax rates are also a factor, especially for upper income folks who have more resources to draw upon in making their decisions (“Americans Moved to Low-Tax States in 2024,” https://taxfoundation.org/data/all/state/americans-moving-to-states/). The data comes from the U.S. Census and from industry moving companies United Van Lines and U-Haul.

The census data shows that the five states losing the most population in 2024 were Hawaii, New York, California, Alaska and Illinois. Those that gained the most were South Carolina, Idaho, Delaware, North Carolina and Tennessee. The moving company data offered slightly different rankings but, in general, confirmed the census data.

Digging deeper into the tax differences among the states, the study observed:

• Of the 26 states that had per capita state and local tax burdens below the national average in 2022, 18 had population growth in 2024. Conversely, of the 25 with above average taxes, 17 lost population.
• The top one-third of states gaining population had an average top state income tax rate of 3.5%. The bottom one-third, the population losers, had an average top tax rate of 6.7%, nearly double.
• Six states in the top one-third have no income tax at all.
• Twelve states have a flat-rate income tax, rather than a progressive system with escalating tax rates as income goes up. Of those 12, eight experienced population growth in 2024.

The pandemic altered employment patterns, enabling remote and hybrid work environments. According to the study, three states with “highly uncompetitive tax codes” enacted reforms to compete better with their lower-tax neighbors for jobs and businesses. These were Iowa, Louisiana and Arkansas.

Whether other states join the tax-cutting movement remains to be seen. One of the advantages of federalism is that the states can serve as laboratories for new ideas in governance.

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