Mises Wire

Census Data Shows People Are Fleeing High-Tax States

One of the more puerile demands made by knee-jerk nationalists is “love it or leave it.” In their minds, one is not allowed to be unhappy with life under the local state monopoly, and all complainers are required to immediately emigrate if unhappy.

This is often the refrain of American right wingers who insist the entire world outside the United States is a wasteland, although the slogan is not limited to Americans. A similar slogan (in Portuguese) was also employed by the military dictatorship in Brazil.

As I note here, however, leaving one’s home country can be exceptionally expensive and difficult. Even getting passports for a family of four can cost a household hundreds of dollars. Relocation can be quite expensive monetarily, and that doesn’t even take into account the very real non-monetary cost of being thousands of miles from family and — usually — having to learn a new language and very different way of life. Moreover, governments simply don’t want their more productive citizens to leave and will place barriers in the way of emigration.

Fortunately, there are some parts of the world — the US among them — where one can somewhat change the legal regime under which on lives without enduring the full costs of international relocation.

Even after nearly a century of relentless centralization under the US federal government, there are still significant differences among states in terms of tax laws, drug laws, gun laws, and levels of political corruption.

Many Americans are aware of these differences and often express their preferences by “voting with their feet.” In other words, they relocate.  It is relatively easy to move from California to Arizona and to take all of one’s movable capital (i.e., not real estate) across state lines. One can travel back to see friends and family with relative ease. Escaping a high tax regime via migration is still less desirable than simply lowering taxes where one already lives, but interstate migration is much easier than foreign migration.

Given the relative ease with which one may travel across state lines, an analysis of interstate migration makes for a good laboratory in which to study the preferences of taxpayers and households. Many have pointed out that states with greater economic freedom tend to attract more migrants from out of state. Back in September in Mises Daily, for example, Gabriel Openshaw explored some of these differences.

Presumably then, these states that are more free will tend to attract more people, all things being equal.

Last week, the Census Bureau released new numbers on state population growth. If we map the year-over-year population growth rates, it looks like this:

Here, we note that population growth is weak in the Northeast and much of the Midwest, while it is stronger in the South and the non-California West.

Driven by a flight to oil jobs in North Dakota, the growth in ND topped the list with 2.2 percent growth, or 16,800 new residents, which is a lot for a state with fewer than a million people. Colorado gained 100,900 new residents to add to its 5.3 million people in 2014. Meanwhile, New Mexico, Mississippi, Maine, Connecticut, Vermont, Illinois, and West Virginia all lost residents. New York was 16th from the bottom and added only 46,900 residents to its population of more than 19 million.

The Wall Street Journal examined these trends in light of future likely changes to the electoral college. These trends will help states like Texas, Florida, and the Western US gain in influence in national politics.

However, when it comes to looking at whether or not people are moving from other states to these places, this map can be misleading.

In-Migration from Foreign Countries 

Many states with some of the largest population gains over the past year have been gaining population from foreign areas. Among people who were already American residents last year, the first map actually overstates the extent to which people have migrated from other states. Indeed, California, New York, Texas, Massachusetts, and Florida are all being propped up in population growth via foreign in-migration.  If we check the Census Bureau’s new data from September 2015 on in-migration from foreign areas, the map looks quite different:

In terms of new residents from foreign countries, Massachusetts tops the list with nearly one in one hundred Massachusetts residents having lived in a foreign country just one year ago. Washington State is close behind, and we can note that Texas, California, Florida, and Virginia growth rates are all fairly dependent on in-migration from outside the US.

Will new immigrants from foreign countries stay put in their initial state of residence? This map suggests that, at least for first generation immigrants, they will. There are many reasons for this, including the fact that the foreign born often like to stay near communities that include other foreign born residents. By the second generation, however, the incentives to stay near immigrant enclaves gives way to incentives to migrate to states with freer economies and more economic opportunities.

State-to-State Migration

If we look just at in-migration from other states (again, from September 2015), we find that California, New York, Texas, New Jersey, Pennsylvania, Illinois, and the Great Lakes area in general have attracted relatively few migrants from other states.

The most attractive areas have been the more rural areas of New England, the Carolinas, and the West, not including California or Texas. If it weren’t for foreign migration, much of the North would have flat or negative growth rates:


In some areas, much of this has been driven by a boom in oil jobs, and workers have relocated to states that offer the relatively-high wages that oil-extraction jobs offer.

In North Dakota, for example, more than 5.3 percent of the population lived in a different state a year earlier. Alaska was similar with a rate of 5.2 percent coming from out of state over the past year. Idaho, Hawaii, Nevada, Wyoming, and Colorado all also showed more than 4 percent of their populations coming from other states over the past year. In California and New York, however, only 1.3 percent of residents had recently arrived from out of state. In Texas, 2.0 percent had recently arrived.

This also follows a longer trend in which Americans have been moving from the old population core of the Midwest and Northwest, and been moving South and West.

Conservatives had made a lot of hay with this migration trend, noting that Americans are “fleeing blue states,” by which they mean states where the government is perennially controlled by Democrats. While the GOP is essentially indistinguishable from the Democratic party at the national level (as the latest budget deal makes clear), Republican-dominated state governments often actually tend to refrain from raising taxes or creating new regulations at the state and local level.

Indeed, “blue” states like New York, California, New Jersey, Connecticut, and Wisconsin are often ranked as the states with the largest tax burdens while much of the Rocky Mountain West and the South tends to have much lower tax burdens.

This is not a perfect, correlation since some “purple” or “bluish” states are also known for relatively low taxes, including Colorado, Washington State, and Delaware while experiencing sizable population growth in many cases.

The Importance of Decentralization 

Nevertheless, given the relative ease with which one may migrate from state to state, this is perhaps one of the examples we have of how people do indeed vote with their feet.

It has always been problematic to makes these comparisons across national boundaries, however, since a move from, say, Norway to Germany, would require learning a new language and becoming accustomed to a possibl\y very different legal system, not to mention the cultural differences.

Countries that have a monopoly over the entire area in which a certain language is spoken enjoy a built-in barrier to emigration. A native of Prague who is not fluent in anything other than Czech is going to face a fairly high cultural barrier if he wishes to move somewhere else in Europe. This is a big part of why we do not see the sort of “voting with feet” that we see in North America.

A Californian who moves to Nevada or Texas, on the other hand, will not face nearly the same culture shock.

This reduces the barriers that states can erect to prevent residents from responding to tax increases or big-government initiatives by simply emigrating.

This also highlights the central importance of decentralization in government and legal systems, and it explains why the left has so long been devoting to centralizing law and government into one national system.

As long as there are significant differences among states, residents will have many different choices, and this choice translates into freedom. As centralization increases and variety decreases, however, freedom is diminished, and residents have fewer choices and fewer options.

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