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Wednesday, January 11, 2017

Millions Escape to States With Right-to-Work Laws and No Income Taxes

State income taxes tend to hurt growth and right-to-work laws tend to promote it.

One highlight of the Christmas holiday season for me is the Census Bureau‘s release of its estimated population figures, as of July 1, for the 50 states and the District of Columbia.

It’s always interesting to see which states have grown the most in the past year: for 2015-16 the fastest growers were Nevada and Utah at 2 percent and Florida, Idaho and Washington at 1.8 percent. It’s also interesting that an unusually large number — eight — of the states are estimated to have lost population in 2015-16: Connecticut, Illinois, Mississippi, New York, Pennsylvania, Vermont and Wyoming. In percentage terms, the biggest loser was Illinois, the home state of the outgoing president. Sounds like there’s some column material there.

Public policies can make a difference in whether states grow — or, like Illinois, decline. You can see how by aggregating the population data for states according to whether they have state income taxes and whether they have right-to-work laws. The following tables show the populations of such states in the 2010 Census and the 2016 Census estimates, together with the population increases in numbers and percentage.

Clearly states without an income tax and states with a right-to-work law have been growing more rapidly than those with income taxes and without right-to-work laws. Fully 40 percent of the nation’s population growth occurred in the nine states with no income taxes and 64 percent of the nation’s population growth occurred in the 26 states with right-to-work laws.

The growth in no-income-tax and right-to-work states was fueled largely by net domestic migration rather than international migration, according to the 2016 Census estimates. The following tables show the numbers for the 2010-16 period.

More than 2 million people moved within the country to no-income-tax and right-to-work states from other states. States with no income taxes attracted significantly more Americans than immigrants; states with right-to-work laws attracted almost exactly the same number of natives and immigrants.

Immigrants were less likely to go to such states: 75 percent went to states with income taxes and 60 percent to states without right-to-work laws. This makes a certain sense: immigrants are less likely than natives to pay income taxes (because those with low incomes usually pay little or none), and immigrants are less likely to be subject to paying union dues (since most union members are public employees and immigrants tend not to be eligible for or to seek public sector jobs).

The bottom line: State income taxes tend to hurt growth and right-to-work laws tend to promote it.


States with no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming (New Hampshire and Tennessee do have taxes on dividend income).

Right to work states: Alabama, Arizona, Arkansas, Florida, Georgia, Idaho, Indiana (since 2012), Iowa, Kansas, Louisiana, Michigan (since 2013), Mississippi, Nebraska, Nevada, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia (since 2016), Wisconsin (since 2015), Wyoming. Kentucky and Missouri seem likely to pass right-to-work laws this year, and New Hampshire may do so.

States with no income tax and with right-to-work laws: Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming.

Republished from AEI.