For years, people and businesses have flocked across the heavily taxed California and New York borders to more freedom-friendly states like Texas and Florida. The exodus was so large that by the time the 2020 census figures were released California and New York had lost enough populations to cost them a seat in Congress. In contrast, Texas won two seats and Florida one.
The pandemic slowed down the typical summer moving season in 2020, but according to North American Moving Services, California and New York continued to be among the states with the highest emigration of residents last year, while the Texas and Florida were among those with the greatest in-migration.
This trend appears to be continuing, given current rental prices for moving trucks. A recent audit shows that renting a standard 26-foot U-Haul truck in Dallas and back to Los Angeles costs $ 1,469. Getting one from LA to Dallas costs three and a half times as much ($ 5,154).
This higher price probably reflects the much greater demand for rental trucks from LA residents to move than from Dallas residents to move to LA.Riding a truck from Dallas to LA is so much cheaper, maybe because U-Haul needs these trucks returned to LA to meet this higher demand. Similar patterns exist for other city pairs in our four largest states.
While many factors factor into a decision to relocate, it’s hard to ignore the stark contrast in public policy approaches between these two pairs of large states. Texas and Florida are two of the eight states that have no state-level income tax, while California and New York impose two of the highest state income taxes, with higher rates 13.3% (highest) and 8.8% (highest fifth). ) respectively. It’s a substantial portion of the change taken from people’s paychecks that they can keep if they move to Texas or Florida.
The Fraser Institute’s most recent annual report on North American Economic Freedom ranks Texas fourth and Florida second. California was 47th and New York was dead last, as has been the case for 11 of the past 12 years. The Tax Foundation’s State Business Tax Climate Index showed a similar contrast: Texas was 11th and Florida fourth, while California was 49th and New York 48th. There is a fairly clear distinction in the approach between the high taxes and regulatory burdens of the latter two states and the low fiscal and regulatory burdens of the former two.
These differences in population migration and public policies may be just a coincidence. However, recent academic research in the Southern Economic Journal suggests otherwise. Co-authors Imran Arif, Adam Hoffer, Donald Lacombe and I have examined over 20 years of metropolitan statistical data on population migration and economic freedom. After controlling for other factors that influence population migration, we found that MSAs with greater economic freedom had higher net in-migration.
Specifically, a 10% increase in relative economic freedom was associated with a 27% increase in net immigration. On average, this translates into an increase in net immigration of 22 people per year from every other metropolitan statistical area (and there are nearly 400 MSA). Our results are consistent with similar findings in several academic papers using state-level data.
Much has changed since the start of the pandemic. However, when it comes to relocating, Americans continue to vote with their feet for economic freedom, leaving states with high taxes and regulatory burdens like California, New York, Illinois, and New York. Jersey for states with low taxes and regulatory charges such as Texas, Florida, North Carolina and Tennessee.
While there is still plenty of room for improvement in state policy, even in Texas, this model bodes well for the health of the Texas economy for years to come.
Dean Stansel is Associate Research Professor at the Bridwell Institute for Economic Freedom at Southern Methodist University and the principal author of the Fraser Institute’s annual report on Economic Freedom in North America. He wrote this column for The Dallas Morning News.
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