Recently released IRS data confirms what common sense has long suggested. Americans are leaving high-tax states like California and New York for lower-tax alternatives like Tennessee and Texas.
A clear negative relationship exists between a state’s top marginal income tax rate and net per capita migration. California and New York lost the most residents, and both rank in the bottom three states for fiscal freedom. Texas and Florida gained the most residents, and unsurprisingly, both rank among the best in that measure.
The United States is home to a wide range of regulatory environments, creating a competitive marketplace where states compete, with varying degrees of success, to attract residents. States like New Hampshire and Tennessee have no state income tax, while others like California have rates that can rival federal levels. It should not be surprising that individuals and businesses go where they’re treated best, taking their tax revenues, consumption, and business activity with them.
The numbers tell a clear story. A single earner making $100,000 in California pays roughly $5,000 more per year in state taxes than the same earner in Tennessee, adding up to more than $50,000 over a decade. Whether used for a mortgage down payment, invested in productive assets, or spent throughout the economy, those funds could have generated real value for both the individual and society rather than being absorbed into government programs. Paying $5,000 more per year is actually even worse than it sounds, because that money could have been invested and grown over time. Every dollar you overpay is a dollar that’s no longer working for you.
The rise of remote work following the COVID-19 lockdowns has given workers a level of flexibility and optionality never seen before. For many, the days of being forced to work in a New York skyscraper and pay New York taxes are over. When individuals have the freedom to work from anywhere, they are not going to choose the places that make it harder to prosper and raise families. If you’re going to work hard and take financial risks to build something, why would you do it somewhere that punishes you for succeeding?
Utah’s state motto is “industry,” reflecting the state’s origins as a place where people work hard and build things. The Beehive State currently leads the nation in regulatory freedom but sits only in the middle of the pack on fiscal freedom and ranks just 15th in overall tax competitiveness.
To position itself as a top destination for innovation and economic growth, Utah must match its regulatory excellence with genuine fiscal competitiveness, because industry, as its own motto reminds us, is most productive when it is free to flourish.
