Are People Fleeing High Taxes — or the Blue State Governance Model?

by James A. Bacon

It’s one of the most contentious issues in state-level tax policy: To what extent are higher taxes self defeating? Do higher taxes drive people into other states and, thereby, undermine the tax base and defeat the purpose of higher taxes in the first place? Throughout my Bacon’s Rebellion commentary, I have always contended that taxes are one factor — a significant one — that influence peoples’ decisions where to live.

Now comes a thoughtful, if not entirely convincing, study from the Center for Budget and Policies Priorities that suggests otherwise. The authors of “Tax Flight Is a Myth: Higher State Taxes Bring More Revenue, Not More Migration,” argue that the effects of tax flight are so small that state governments can raise taxes and be assured of a substantial gain in revenue.

The study makes a number of points worth considering. First, inter-state migration is not common; only 1.7% of U.S. residents move from state to state in a given year. Second, low taxes can prevent a state from maintaining the kinds of high-quality public services that potential migrants value. And third, migration is more likely to be driven by cheaper housing than higher taxes.

Here’s how I would respond. First, while only 1.7% of U.S. residents move from one state to another in any given year, that movement can add up over time. That figure implies that 17% of U.S. residents undertake an interstate move over the course of the decade. That is enough to affect a state’s tax base. In the short run, a state can raise taxes with impunity. But the consequences can be severe over the longer run.

Second, higher taxes do not necessarily contribute to better public services. Sometimes they do. But sometimes they just support featherbedding and expensive pensions for public employees. Sometimes they underwrite boondoggle public works projects that favor the politically connected. Sometimes they support entitlement programs that make life easier for the poor but do nothing for the people who pay the taxes.

Third, housing prices are a factor influencing where people move. So are average wage levels and the general cost of living. Also, as economic geographer Richard Florida has illuminated, members of the “creative” class (who are desirable from an income and tax-generating viewpoint) are drawn by a metropolitan region’s character — its openness to newcomers, its tolerance for diversity, and its cultural vibrancy and authenticity. To those factors I would dd the role of human settlement patterns: Some regions are more livable than others. Finally, I would hazard a guess that the single-most important factor driving inter-state migration is simply the availability of jobs. If you can’t find work, none of the other factors really matter. Taxes are only one factor in the mix, and it is important not to over-sell them.

But tax levels are correlated with job creation and income growth. (For evidence, click here.) That’s not because they are the critical driving variable, I suspect, but because they are a proxy for a larger mindset, what Walter Russell Mead terms the “blue state governance model” of high taxes, public employee unions and heavy regulation. (For a taste of Meade’s thinking, read “Blue State Schools: Shame of a Nation.”) Overall, the Red State policy mix is better at creating jobs and raising incomes than the Blue State policy mix.

Bacon’s bottom line: Taxes don’t matter as much as some conservative analysts think they do. But they are a proxy for the Red State policy mix that has been proven to be far more robust than the Blue State model.

Share this article


(comments below)


(comments below)


25 responses to “Are People Fleeing High Taxes — or the Blue State Governance Model?”

  1. ” That figure implies that 17% of U.S. residents undertake an interstate move over the course of the decade”

    geeze Jim – what an amateur mistake. Are you assuming that number applies to the very same locality every year for 10 years rather than it being the average of all localities that vary over the years?

    I think local/regional taxes make a difference. People will choose to live in the cheapest county depending on some factors.

    Like you’ll see folks flee from NoVa to live in cheaper Spotsylvania once their kids have been educated and they don’t have to send them to the less fancy schools in Spotsy.

    And some folks will retire to low tax jurisdictions …but there can and is a downside.

    do you really want to move to an area with a minimal law enforcement presence or a not good fire and rescue system to a hospital 20 miles away?

    you sort of get what you pay for..

    the cheapest states in the Union to live are not necessarily places where a lot of folks would willingly move to ….

    however, I’ll say this.. we saw a LOT of Nebraska and similar rural locales on our west trip this year and there are a ton of available places for those who do not need to worry about employment and have sufficient funds to live on.

    beautiful places – in fact… with wonderful weather …. low crime… and virtually nothing else so if you go – get one with a porch and a sat dish with internet!

  2. Groveton Avatar

    I haven’t had a chance to read the numerous linked-to articles. But my initial reaction is … who is among that 1.7% who will move in a year? Only 47% of workers pay taxes. Far fewer pay more than they cost. It’s those taxpayers which matter. And here’s the bad news – they are mobile.

    I own a home in Maryland but spend the vast majority of my time at my home in Virginia. My stockbroker had some good advice for me – don’t live in Maryland and definitely don’t die in Maryland. In three years, four of my five sons will be out of the house. I’ll be able to live wherever I want. Maryland is beautiful but I won’t mover there permanently. I won’t pay the confiscatory taxes and I won’t let them take 10% of my estate when I pass. At the least, I’ll move down the coast to Cape Charles, VA. Same Chesapeake Bay – very different taxes.

    Which brings me to my final point – the boomers are retiring. Why on Earth would a wealthy boomer retire to a high tax state? Rich retired people may not pay income taxes on their salaries but they sure as hell pay taxes on interest and capital gains. They pay real estate taxes and sales taxes and gas taxes. And they usually don’t have young children to educate.

    Go ahead libs – raise state taxes. Make sure to target the people with money. You know, the ones who pay more in taxes than they consume in services; the ones who will move.

    Sometimes I have to wonder about this country …

  3. Groveton Avatar

    Yeah LarryG – high tax states have great law enforcement and are very safe! Look at the crime rate in DC. Then look at the crime rate across the river in Northern Virginia. Which has higher taxes? Which is safer?

    If high taxes created public safety then Los Angeles would be Culpeper.

    Chase this link. Then, sort by city. I see an inverse relationship between violent crime and stat tax rates. At least, it looks that way when I “eyeball” the data.

  4. ” Only 47% of workers pay taxes.”

    Groveton, my man.. are we not talking about local/property taxes here?

    do 47% of NoVa workers not pay property taxes?

    ha ha ha

    re: crime rate and law enforcement – you got me on that one.. I’m afraid but I stick by fire/rescue…. libraries, parks, community amenities….

    we have a gated community here in Spots Woods and a million dollar home burned to the ground last year because the nearest staffed fire station was far, far away….. I bet fire insurance on those homes is pretty heft given those circumstances.

    but Groveton – 47% of NoVa workers don’t pay property taxes? Really?


  5. Look at job growth in Texas versus California. Both states are in the sun belt; both have excellent universities and substantial Hispanic populations. But California is struggling under a high-tax, high-regulation business climate, while Texas growth is much higher.

  6. tis true but have you seen where Texas scores on schools? I don’t think too many people from NoVa would be pleased with Texas schools.

    California is still the 8th biggest economy in the world ..while Texas is rising and now 14th but California’s economy is almost twice as big as Texas so they have a ways to go.

    check out this tax burden comparison for the states:

    Texas has no income tax whereas California has an ugly one.

    but… read this:

    ” Property taxes are a significant part of the overall cost of owning a home in Texas. The state has no income tax, so property taxes carry a heavy load when it comes to funding public-school, city, and county budgets.”

    and this is interesting:

    ” The “Robin Hood” system currently in place was precipitated by a 1984 lawsuit. At that time, a group of school districts charged that Texas ‘ use of property taxes to fund education resulted in substantial inequity among school districts (Edgewood v. Kirby). After making its way through the courts, the lawsuit reached the Texas Supreme Court, which ruled the finance system unconstitutional in 1989.

    In 1990, the Texas Legislature was convened in a special session and passed Senate Bill 1, which provided more money for equalization, but essentially left the system intact. After the Texas Supreme Court struck down SB 1, the Legislature passed House Bill 351 in 1991, creating 188 County Education Districts (CEDs). The CEDs were allowed to levy state-mandated property taxes and redistribute the revenues to member districts.”

    bottom line – when you talk about local property taxes – you’re talking about schools

  7. Groveton Avatar


    Since we were talking about people leaving a state over higher taxes instead of people leaving a locality over higher taxes – I thought I’d focus on state income taxes. There are countless cases of people living in one locality versus another to avoid high property taxes.

  8. Groveton misquoted. It is not 47% of workers, it is 47% of households. The vast majority of which have less than $30k in income, and many of which have No income.

    This entire block of people earn 4.9% of the total , how much can w expect to get from them? If we tax them at 25% we will get one % of the total, until they starve.

  9. A.other reason it looks as if the wealthy pay more in taxes is that they count taxes that are paid in the form of rent, by the poor.

  10. I’m pretty sure most local workers pay local taxes… but in some places like the place I live – the average tax bill is about 1/2 what it costs the country to educate one kid.

    We get a LOT of our growth from young couples settling down to have a family.

    those young couples end up paying about 1/2 the actual costs to educate their first child. After that, the numbers get even worse.

    A household with two kids pays about 2K in taxes and costs the county 10K.

    when most of your new growth is household with kids.. tax increases – property tax increases are inevitable.

    the people who move here often come from jurisdictions with higher taxes.. so Jim Bacon got that part right…

    A kid in Spotsylvania costs 60K to educate (K-12) and likely his parents paid less than 20K in property taxes….during those 12 years.

    some of these folks quite likely got earned income credits on the Federal Taxes and may well have not payed any or very little Federal Tax.

    The costs of the Public Schools in Fairfax is so high that it necessitates a high property (and other) taxes which, in turn , makes it difficult for young marrieds not yet at their top earning capacity with family to afford a place to raise a family so they leave for the suburbs and places like Spotsylvania and become another commuter clogging up I-95 and I-66 each day.

    local/regional taxes do affect where people live – especially families.

  11. I live –the average tax bill is about 1/2 what it costs the country to educate one kid.

    You guys make me sick with this kind of false statistic crappy argument. It does not matter what the taxes are compared to what it comets to educate a kid. A lot of houses have no kids. It was the same pwhen Larry and I were educated at someones expense other than our parents. It is a intergenerational tax, and now Larry, as usual, wants to change the rules so he does not have to pay back for the benefits he received.

    It may well bow that the taxes are not high enough, but if every house paid by Larry’s suggestion, there would be a huge surplus and he would say taxes are too high.

    But that isn’t what he wants, either. He wants the proffer on home construction to be high enough to Finley a school endowment for every child that might ever live there. Thereby ensuring no housed get built and no schools are needed, and F’s burg can be a qquiet retirement violator with. 1950s taxes forever.

    Change happens, it costs money, get used to it. It costs no where near as much as no change.

    Texas has low taxes. They llaaid off 49000 teachers because of a budget shortfall.


  12. Another commute clogging I 95. Yeah yeah.

    The loudoun pptaper had a front page story aping the story I reported on previously: you can save money by moving to a high cost housing area and giving up your car for public transit. It is a bogus cost estimate because the results are not equal. Never mind the cost of putting four people on the metro to go someplace. If metro was a shared vehicle, they would only charge once.

    It is la bogus estimate put out by a foundation with a phony name. The end result of their plan is that you do not Hague a car and many options are now closed to you: a cost the estimate does not consider.

    The people Larry is complaining about will live someplace and have their kids educated and own a car. Get used to it. Plan on it. Plan for it.

    But. Don’t sit around dreaming up phony scenarios that don’t exist. Plan for what people want, and allow it to happen.

  13. Why is it that conservatives understand and beslieve that the more you buy of something, and the bigger the order you place the less it costs per unit— except for health care?

    And why is it they don’t see universal health insurance as a boon to business?

    If I could buy health insurance, I would work for myself tomorrow, hand hire people to help me in a month.

  14. Groveton Avatar

    Let’s see if we can try this again. The issue is not whether people pay sales and property taxes. That fact has a place in intelligent discourse buit this is not that place. The question is not whether the wealth and/or income gap is a problem. That question has a place in informed public policy debate but that place is not here.

    For one point, I will delve into an unrelated matter…

    “The costs of the Public Schools in Fairfax is so high that it necessitates a high property (and other) taxes which, in turn , makes it difficult for young marrieds not yet at their top earning capacity with family to afford a place to raise a family so they leave for the suburbs and places like Spotsylvania and become another commuter clogging up I-95 and I-66 each day.”.

    Young marrieds with a family desperately try to live in Fairfax County. They do this because Fairfax has great schools while Spotsylvania has medicore schools, at best.

    Spotsylvania has a property tax rate on real estate of $.0086 per $100 of assessed value. Up from $.62 in 2009. Fairfax County has a real estate tax rate of $.107. The difference is $.21. For a $200,000 house or condo, that amounts to $420 per year. Meanwhile, Farifax County has 8 of America’s best high schools. Spotsylvania has none.

    Not only do the extra commuting costs for people of Spotsylvania amount to more than than than the difference in property taxes per year but the quality of educational services is drastically diminished as well.

    Let’s be honest LarryG … the young marrieds with families who live in Spotsylvania County and commute to Fairfax are yuppies who place “keeping up with the Jonses” ahead of common sense economics or their children’s future.

    LarryG (and Jim Bacon for that matter) – perhaps your time would be better sspent if you stopped your jealous ramblings against Fairfax County and asked instead how little, tiny Wise County so massively outperforms your county with regard to best high schools. As an aside, Wise County’s property tax rate is $0.57 per $100.

    This is a question of state taxation policy. Specifically, whether high taxes in one state causes people to move to a different state with lower taxes.

    Bacon thinks high taxes cause people to move. So do I.

    Beyond that, I suspect that the people with the highest incomes not only have the biggest incentive to move but also have a great willingness to move.

    This is a problem for state government officials. Regardless of the causes of the income gap it seems proven that a very few taxpayers at the top of the income ladder pay a disproportionate share of the taxes. Once again, this is not a question of fairness, it is a question of policy. The question of fairness has been previously discussed and, I am sure, will be discussed again in the future.

    On the proximate matter of state tax policy, I believe that relative high state taxation causes “surplus taxpayers” to move elsewhere. By simple math, this place a much greater burden on those taxpayers who so not move.

  15. Groveton Avatar

    Sorry for the typo. I am sure that the people of Spotsylvania County would like to have real estate taxes assessed at $.0089 per $100 of value. However, the correct number is $.89.

  16. I’m sure that taxes are one reason people move, but considering the expense of moving, there would need to be other reasons or a HUGE tax bill involved.

    Taxachusetts has high taxes, but no income tax on government pensions. A government employee can retire there, pay no tax AND get great benefits.

    Some states have low income taxes but high sales tax, or property taxes, so the total tax burden does count. For me, I would choos not to live in Mississippi or North Dakota, just to save a few bucks.

  17. Groveton Avatar

    Hydra is very right. I have friends in Texas. When I speak with them we often talk about politics and taxes. People in Texas pay plenty in taxes – they just pay in unique ways.

    Interesting point about government pensions in Taxachusetts. Yet another socialist program. How’s that working out for England?

  18. Property taxes are used in many states to fund local services – like schools, law enforcement, fire&rescue, libraries, parks, etc.

    Unlike the Federal Taxes that about half of households do not pay – most everyone pays property taxes either directly as owners of property or indirectly as renters of property.

    In general – you pretty much get what you pay for. If taxes are high – likely the schools are good, libraries and parks plentiful and 24/7 fire/rescue with industry-standard response times the norm.

    the idea that someone would move from one state to another… to save money on taxes – is a pretty questionable thesis unless you also look in the local property tax situation.

    Texas is a good example but so is Oregon and Montana.

    Texas has no income tax and the other two have no sales tax.

    As a direct result – school funding is a much bigger local issue… because the State has less taxes at that level.

    The courts in Texas have actually ruled that the richer counties in Texas have to provide money (from their own county taxpayers) …to the poorer counties in Texas.

    so if you want to move to a state with less state income or sales tax – better check the county tax level also.

    More than a few states have low state taxes but as a direct result taxes are high at the county level.

  19. There does need to be some mechanism to ensure that truly low-income, low-resource schools that first make a local tax effort can operate at state standards. But there is no local tax effort requirement in Virginia and, of course, our elected reps to Richmond have done absolutely nothing about it. I am sick and tired of hearing candidates say that they will go to Richmond and change the school funding formula when they cannot even change something like this or even get the ability to let Fairfax County sets its own starting date.m BTW, I am not spending any of my vacation money in VA this year. Going to South Carolina.

  20. Darrell Avatar

    I lived in Cali once. I left there because of taxes. Moved to VA. Paid 1/3 less taxes. Got paid 1/2 of the Cali wage. Took a job overseas. Got paid NoVa wages to be gone all the time. Developed a new plan to be full time tourist overseas from a no tax state. Monitoring taxing news in Alaska, Wyoming, Washington and the Marianas. Zero hour is rapidly approaching.

  21. ” But there is no local tax effort requirement in Virginia and, of course, our elected reps to Richmond have done absolutely nothing about it”

    but there really is.. some just don’t think it is enough or that it is enforced but the data shows that all but 2 counties in Va actually provide more local funding than the State requires.

    The local composite index is calculated this way:

    The Composite Index is calculated using three indicators of a locality’s ability-to-pay:

    True value of real property (weighted 50 percent)
    Adjusted gross income (weighted 40 percent)
    Taxable retail sales (weighted 10 percent)

    is that the wrong method? what would be a better way to calculate?

    I note that in Texas – they call the law to require all counties to contribute to a fund to equalize funding – the “Robin Hood” law – because the richer counties in Texas have a similar attitude as NoVa does about the propriety of making their taxpayers pay for other county’s schools.

    so are Virginians opposed to the equalization concept itself to start with or are they opposed to the way local effort requirements is calculated or what?

  22. Groveton Avatar

    “so are Virginians opposed to the equalization concept itself to start with or are they opposed to the way local effort requirements is calculated or what?”.

    My answer: “or what”.

    I am opposed to continual subsidies. Transfer payments without end. If certain communities (perhaps through no fault of their own) are unable to raise sufficient taxes for a functional society then there is a problem. The question is whether the problem is fixable or not. That, in turn, depends on the legitimate economic prospects for the community in question.

    Some communities in Virginia seem to have no real hope of economic improvement. Yet other communities in Virginia have bustling economies. A simple example is unemployment rates in Martinsville and Arlington County. Martinsville has 17.8% unemployment. Arlington county has 3.9%.

    At what point are the economic transfers no longer a helping hand but, rather, a permanent hand-out?

    The vast majority of our ancestors braved perilous journeys to get to Virginia. Today, uneducated people illegally make horribly dangeroue trips from places like Mexico to get to places like Arlington. They arrive with no money, no ability to speak English and no legal right to be in Arlington. And you know what – most of them end up doing just fine. However, it’s unreasonable to ask people to move from places of chronic unemployment to places where there are too few people relative to jobs.

    I know moving would be inconvenient. I know that many people want to live where they have been living. However, this eventually becomes a personal choice rather than something forced upon you by society or fate. Once that happens, these transfer payments become subsidies for people’s personal choices.

  23. Texas also has a fund, collected as an electric bill tax, to help poor people pay their bills. The fund has collected far more than it has paid out, and the payments have been cut recently.

    A cruel and dishonest way to hide the states budget deficit.

  24. I really don’t disagree with Groveton’s assessment of counties that are poor and cannot easily get better (in part because their workforce is not well educated) but isn’t the best way to help them is to help get their kids a better education that would allow them to move to places where there are jobs?

    Any of those kids that might move to get a job in NoVa is going to be competing against NoVa-educated kids… right?

    And this is not a Virginia-only problem. There are poor counties all across the United States… and apparently Constitutional requirements that all kids have equivalent equitable access to education resources.

    I think Virtual Virginia (distance learning) is one path to leveling the playing field for those kids but right now – we’re

    they’re still arguing over who should be paying for it and the richer counties are opposed to it.

  25. A Virginia state senator told me that the senator heard parents in rural Virginia saying that they did not want their children to attend college because they would surely move away from home. This speaks to both Larry’s and Groveton’s comments.

Leave a Reply