Tired of high taxes? Maybe it's time to move
Tired of high taxes? Maybe it's time to move
CNBC data analysis shows outbound flow from high-tax
states.
By John W. Schoen 17
Hours Ago CNBC.com
Everyone complains about taxes. But millions of American
households apparently are doing something about it: Picking up and moving.
A CNBC analysis of tax data and figures provided by two
major national moving companies shows that states with the highest per-capita
taxes, for the most part, are also seeing the biggest net migration out of
those states.
Take Connecticut, for example.
Earlier this week, the Nutmeg State's legislature
approved a collection of new taxes to close a two-year, $40 billion budget to
help pay the multibillion-dollar tab to repair and replace the state's
dilapidated roads and bridges. The package includes a 50-cent-per-pack hike in
cigarette taxes and a bump in tax rates on corporations and the state's
wealthiest earners.
The budget battle drew heated debate, along with threats
from large employers like General Electric, which issued a rare statement that
it might consider moving its Fairfield headquarters.
Republican opponents warned that the tax hikes would
likely drive residents to flee to lower-tax states. One legislator suggested
that a local moving-and-storage company up for sale should do a booming
business moving households from the state.
"I think the best buy in Connecticut right now is a
business for sale in Westport," Michael A. McLachlan, R-Danbury, told the
AP earlier this month as the debate wore on. "For $650,000, a sharp
investor can get up and increase this business into a mega moving company,
because that's what people are going to be doing, starting today."
Based on an analysis of 10 years of tax data and the
figures provided by United Van Lines and Atlas Van Lines, Sen. McLachlan may be
on to something.
In states with the highest taxes—per person—the number of
moving out of the state are greater than the number of people moving in.
Connecticut taxpayers, for example, paid an average of
$4,431, according to data from the Federation of Tax Administrators, a group
that represent state tax officials. Last year, United Van Lines and Atlas Van
Lines, the two largest movers in the U.S., moved 3,212 households out of state
and 2,368 moves inbound. That means 55 percent of all moves left the state, for
a net outbound flow of 58 percent. Over the last decade, the two companies
reported 36,837 moves outbound to 30,426 inbound, for a net outbound flow of 55
percent.
The same pattern shows up in other high-tax states, like
New York, New Jersey and Massachusetts.
Of course, the flow of households only reflects the
migration patterns of people who hired these two moving companies and may not
track overall population shifts.
The pattern doesn't hold true for all states. Vermont and
Alaska, with the second- and third-highest per-capita taxes, are still seeing
net inbound moves, based on van line data.
While high taxes likely prompt some people to move, there
may be other reasons why highest-tax states are correlated with net
in-migration of households. One reason, according to Moody's analyst Marcia Van
Wagner, is that older states like Connecticut have bigger bills to pay than
younger states that don't have large legacy costs, like 100-year-old bridges.
"These older states have more built-up
infrastructure and greater replacement needs compared to newer states with
growing populations who haven't built up the level of debt yet," she said.
"So you would expect the growing states to eventually build up those kinds
of debt burdens, because they still need to build roads and schools."
While per-capita tax data represents total taxes
collected per person, it doesn't always reflect the tax burden on individuals,
because it also includes corporate taxes. States like Alaska and North Dakota,
which have high per-capita taxes overall, generate large revenues from taxes on
oil and gas production, which lowers the burden on individuals.
There's also a wide range of mixes of different types of
taxes, which create varying burdens on individuals from one state to another.
Some states, like Florida, Washington, Texas, Nevada and South Dakota, generate
the bulk of their revenues from sales taxes, which tend to shift the burden
onto lower-income households. Others, like Oregon, Virginia, New York,
Massachusetts, California and Connecticut, generate roughly half—or more—of
their revenues from individual income taxes.
While states cut spending sharply following the Great
Recession, most have stabilized their budgets and have begun seeing tax
revenues rise again. While some like Connecticut have raised rates, much of the
increase is being generated by the growth in employment and consumer spending,
which generates higher sales and income taxes.
Sales, personal and corporate income taxes—which account
for about 80 percent of states' general fund revenues—are expected to hit $613
billion in the year that ends this month, up 4.2 percent from a year ago, according
to the National Association of State Budget Officers. That compares with a 2.44
percent gain last year.
The biggest gains this year are expected from personal
income taxes (up 4.7 percent) and sales taxes (up 4.0 percent), according to
NASBO. Corporate income taxes, which make up about 6 percent of general funds,
are expected to rise by 1.7 percent.
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