Last September, billionaire Ken Griffin announced he was pulling up stakes and moving Citadel—his gigantic hedge fund—from Chicago to Miami.
The Windy City was out of control, he told Bloomberg, something that dawned on him after a colleague made a coffee run and was robbed by a thief who put “a gun to his head.”
It’s no secret that Griffin’s exit is part of a much larger migration taking place across America.
Data show that several populous blue states—California, New York, and Illinois among them—have been losing population and companies for years. In 2021 Forbes wrote about “leftugees” fleeing blue states for red ones. A few years before that, a headline in The Hill touched on “the great exodus out of America's blue cities.”
New IRS data, however, show the speed with which blue states are losing taxpayers—and their adjusted gross income (AGI)—is increasing. A recent Wall Street Journal analysis found that more than 100,000 people left Illinois in 2021, taking with them some $11 billion in AGI, nearly double its 2019 total. For New York it was $24.5 billion, an increase of more than 150 percent from 2019. California, meanwhile, saw its AGI loss ($29 billion) more than triple since 2019.
That people are migrating from these states is important. But who is migrating is equally important, and the data paint a bleak picture for these states. Taxpayers giving up on the Prairie State and the Empire State made about $35,000 more per year than new arrivals. For Florida, the data are even more stark. The average income for a new arrival to the Sunshine State was roughly $150,000—more than double those leaving.
“In other words, the geese with the golden eggs are flying away,” writes economist Daniel Mitchell, referring to the IRS data.
Going Off the Rails
Needless to say, these data do not bode well for the future of these states. But not everyone is concerned.
The Atlantic accepts the reality that a major migration is underway, one that undercuts the conventional wisdom that “Democratic states are the future,” but rejects the idea that they are “dying.”
“New York City isn’t some dystopian wasteland where no one can see their future,” writes Jerusalem Demsas.
Demsas may be right, but it’s hard to deny there is a dystopian character to what we’re witnessing in many major US cities—including surging crime, failing schools, and social unrest.
Yet there are reasons to believe these problems are going to get worse, not better. Losing wealth-creators and affluent workers doesn’t just affect the economic landscape. It also affects the political landscape.
In a recent WSJ op-ed, Allysia Finley pointed out this primarily works to the political benefit of public sector unions and welfare activists.
“Cities are losing the voters who keep their leaders from going off the rails,” Finley writes, noting that Chicago Mayor Lori Lightfoot was defeated by mayor-elect Brandon Johnson, who ran to her left.
Johnson’s margin of victory was relatively thin, some 20,000 votes. That’s a fraction of the 175,000 people who left Cook County from 2020-2022, Finley points out, and it stands to reason that these are the very people the city needs to get back “on the rails.”
One can see the cyclical nature of this phenomenon. As cities and blue states become more confiscatory and hostile to property rights, they drive out wealthier people and wealth creators. And as prosperous people leave, the politics become more confiscatory and hostile to property rights. And the cycle continues.
‘I Don’t Put Companies in New York’
There’s something very Randian in this phenomenon. After all, the basic plot of Atlas Shrugged involves a small group of industrialists living in a dystopian future in which they struggle to keep their businesses afloat while fighting against an oppressive government and mooching politicians. Eventually they say to hell with it and walk away, taking with them their wealth, creativity, and innovations.
This is very similar to what we’re witnessing, except that we’re not talking about just a few rich industrialists like Dagny Taggart and Hank Rearden (two of the heroes of Atlas Shrugged). It’s not just the Ken Griffins who are leaving, but hundreds of thousands of wealth creators who are voting with their feet, and opting for greener pastures of opportunity.
This is a more realistic version of Atlas Shrugged. The novel was in many ways an epic mystery, Agatha Christie meets Cecil B. DeMille. People are disappearing, and we don’t know why. As Taggart and Rearden struggle (and eventually form a love affair), we keep hearing about some mysterious figure: John Galt.
Eventually we of course learn that Galt is a disgruntled visionary and entrepreneur, and he’s inviting the best and brightest in society to join him in abandoning the looters and leaving them to their own fate. He explains why in a long speech near the end of the novel, which touches on Rand’s philosophy of voluntaryism, individualism, and capitalism.
“All the men who have vanished, the men you hated, yet dreaded to lose, it is I who have taken them away from you. Do not attempt to find us. We do not choose to be found. Do not cry that it is our duty to serve you. We do not recognize such duty. Do not cry that you need us. We do not consider need a claim. Do not cry that you own us. You don't. Do not beg us to return. We are on strike, we, the men of the mind. We are on strike against self-immolation.”
It’s good story-telling, but it’s not exactly believable. What we’re witnessing, however, is: a mass movement of people who are tired of having the fruits of their labor seized to fund increasingly dysfunctional government systems.
We often forget that entrepreneurship is the lifeblood of an economy. Societies without it wither away. And many of these states and cities have become hostile to entrepreneurship and wealth creation.
“I don’t put companies here in New York anymore…or California,” Shark Tank entrepreneur Kevin O’Leary recently told CNN. “Those states are uninvestable. The policy here is insane. The taxes are too high.”
Blue states are in serious trouble.— Jon Miltimore (@miltimore79) May 2, 2023
“I don’t put companies here in New York anymore or in Massachusetts or New Jersey or California. Those states are uninvestable. The policy here is insane. The taxes are too high." pic.twitter.com/HqgP1c0Lkn
As Griffin’s exit from Chicago shows, it’s not just high taxes that are driving people out of cities.
There are other costs—moral, social, and cultural—when you create communities that spurn property rights and celebrate looting.
IRS data only tell us so much. If you want to better understand those costs, pick up Atlas Shrugged.