Mass Exodus Proves High-Tax Democrats Kill Economic Growth

Caroline Anderegg State Policy Associate, Americans for Tax Reform
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In the fight to attract taxpayers and businesses to their states, Republican governors are far outperforming their Democrat counterparts.

New IRS data shows that in 2013 alone, Republican-run states gained more than 200,000 people fleeing Democrat-run states according to a recent analysis by Americans for Tax Reform. The correlation between high tax burdens, crippling government regulations, anti-business environments and the beeline of taxpayers to more friendly states is quite strong.

The reality isn’t welcome news for some. Gov. Andrew Cuomo (D-N.Y.) has not only rejected the explanation for this migration; he has denied basic math as well. Taxpayers crowned New York the “Biggest Loser” among all states in 2013, losing nearly 115,000 people on net, who took with them more than $5.7 billion in adjusted gross income (AGI). In response, Cuomo whined that the ATR analysis was unfair because it didn’t account for in-migration.

Our analysis and the IRS data did. Cuomo was wrong.

In a weak effort to remedy the state’s inhospitable tax climate, Gov. Cuomo recently signed minor tax reductions that, for the first time in years, bumped the state from the worst performer in the non-partisan Tax Foundation’s Business Tax Climate Indexto the second worst. In the midst of these cuts, he ran a nationwide, show-boat ad campaign claiming New York is “open for business.” These actions are a direct response to the trend of mass exodus from New York that the state has experienced for decades.

The next-worst Democrat-run states were Illinois (lost 68,943 people with $3.8 billion in AGI), California (lost 47,458 people with $3.8 billion in AGI), Connecticut (lost 14,453 people with $1.8 billion in AGI), and Massachusetts (lost 11,915 people with $1 billion in AGI). These massive population losses continued a significant trend among these states.

Of the winners Texas was the greatest beneficiary of new taxpayers, at nearly 153,000, while Florida gained more wealth than any other state. Over 74,000 taxpayers, bringing with them $8.3 billion in net AGI moved to the Sunshine State in 2013 alone — continuing an increasingly positive trend of population and wealth in-migration in these.

This is no coincidence. Texas and Florida do not tax any form of personal income. Both states consistently place in the top ten in the Business Tax Climate Index.

In fact, one of the largest state-to-state population losses in 2013 came from 20,465 New Yorkers moving to Florida. Many Democrats claim that the cause of this southern flight is due to the favorable weather. However, this argument collapses when you consider that in the same year over 21,000 people left California’s favorable weather conditions for the sweltering heat of Texas.

Whereas some taxpayers have shown their discontent with their Democrat-run states’ heavy tax burdens by moving, others have protested by ousting their tax-hiking governors and replacing them with Republican, reform-oriented governors. Last year, voters in Massachusetts and Illinois did just that. Recently elected Gov. Bruce Rauner (R-Ill.) campaigned on an overhaul of the state’s tax code and beat his Democrat, incumbent opponent by a margin of more than 140,000 votes.

In Massachusetts, Gov. Charlie Baker campaigned on balancing the state budget while lowering taxes and cutting spending. He beat the anti-reformer Democrat by over 40,000 votes.

Republicans also defeated Democrats in Maryland, where incumbent governor and now presidential-hopeful Martin O’Malley raised taxes on everything from alcohol to rain.

Republican governors who inherited states with high out-migration from Democrats have been working overtime to combat the unfavorable tax climates pushed by Democrat majorities in Massachusetts and Illinois. Gov. Rauner has garnered Democrats’ ire and Republicans’ praise for holding the line on tax hikes in his budgets this year. He proposed a repeal of the temporary income tax hike and launched a “Freeze My Taxes” campaign in an effort to improve Illinois’ standing of the second worst property tax rates in the nation. New Jersey Gov. Chris Christie, who inherited the consistently bottom-of-the-list state in 2010, has vetoed more tax hikes than any other governor in modern history.

Voters are making it clear, with their feet and their votes, that they will not tolerate the careless over-spending and over-taxing policies of Democrat governors. In fact, Republican governors now outnumber Democrats 31 to 18, with one Independent.

For Democrats to continue to ignore the trend of taxpayers fleeing high-tax states is both foolish and detrimental to economic growth. Businesses and taxpayers will continue to leave states that burden them with high personal and corporate income taxes, in favor of establishing residence in low-tax, business friendly states.

Caroline Anderegg is a state policy associate at Americans for Tax Reform.