Americans are fleeing money-grabbing Democrats
People are moving from high-tax states such as California to low-tax states like Florida, a study shows
Blue states have pushed Americans into the arms of red with money-grabbing policies. They’re now looking to raise taxes even further.
America often spoils us with political entertainment. Supreme Court judgments. Two-year long presidential races. Donald Trump. Little is nuanced these days, and every political argument drifts to the extremes. If you’re an American affected by these bust-ups, it can be a dreadful experience. But if you’re simply watching on, it’s captivating stuff.
As much as the world might pretend otherwise, it can’t get enough of US politics. But one of the most interesting battles taking place in America right now isn’t making international headlines. It’s not driven by pure politics, but rather by economics and policy – and unlike sudden outbursts from politicians or tense debates between party rivals, this contest has been a slow burn. It’s the competition between Republican-run (red) states and Democrat-run (blue) states for business, money and residents. And on many of the key metrics, the Rightleaning states are winning.
The battle has been raging for some time. Go back over a decade, and you will find reports of residents in blue states packing up and leaving for red pastures. But analysis published this week shows how this drift has added up over the years – and it’s led to some stark losses for California, Illinois and New York.
In a recent article, economists Arthur Laffer and Stephen Moore presented their latest calculations using a decade’s worth of data. They revealed that six of the seven most highly taxed blue states have lost nearly 5m residents (all experienced a net loss), and almost $250bn (£210bn) of taxable income, to other states.
This analysis is reflected in the most recent data from the US Census Bureau. Last year, Florida saw the biggest influx of new residents, followed by Texas; California, Illinois and New York experienced the highest levels of domestic emigration. And the trend appears to be accelerating.
What’s leading to these new migration flows, largely towards red states? Moore and Laffer – whose theory of optimal tax rates for bringing in revenue became known as the “Laffer Curve” – argue that obscenely high rates have led to people fleeing blue states. The differences in the overall tax state burden are significant. Last year, the states haemorrhaging people – like Illinois and California – both ranked in the top 10 states with the highest tax burdens. New York ranks first, at 12.25pc. Meanwhile, states like Florida rank in the bottom 10, at 6.64pc. Both Florida and Texas boast no personal income tax at the state level.
Moore and Laffer also point to proposals across several blue states that would increase the tax burden even further. Lawmakers in Sacramento, California are considering an annual wealth tax of 1pc for individuals with a net worth of more than $50m , and 1.5pc for those with a net worth over $1bn.
The state’s rich residents now face growing demonisation and the never-ending prospect of tax hikes. What’s more, there’s no guarantee such policies will remain limited to the rich: wealth taxes often signal for where policymakers are heading, which does not bode well for average earners.
But Americans have just recently seen how these “tax the rich” arguments play out at the national level. President Joe Biden promised not to raise taxes for anyone earning less than $400,000 a year, only to then target waiters’ tips and cash transfer apps that allow families and friends to easily settle bills.
Any promise from state legislatures that an even higher tax burden will only fall on the “rich” is unlikely to sit well with many residents who have seen their own tax burden increase.
Not only did Covid solidify the concept of remote working across America; it showed states like Florida and Texas in all their glory – open for business, booming with industry, and offering a better quality of living than places still locked down and restricted. The more people saw of these states, the more there was to like: cheaper housing, more affordable lifestyles.
As a result, Florida saw more than 600,000 businesses open in the state in 2021 – double the number that opened in New York City. Elon Musk also sent a strong message that year when he announced Tesla would be relocated from Silicon Valley to Austin, Texas, citing the state’s willingness to let businesses get back to normal operation.
There’s been plenty of outrage over the low-tax, open-for-business line red states are selling – even on the Republican side of the debate. Earlier this month, Trumpite politician Marjorie Taylor Greene suggested red states could ban blue state residents from moving in, in order to protect their political leanings.
But such criticisms of ongoing competition between the red and blue states – from either party – fail to recognise that this is part of America’s success story: 50 different experiments in tax policy taking place concurrently across states, so the public can see what works and vote with their feet. Right now, they’re voting against the high-tax, blue state consensus.