High 10 inbound vs. prime 10 outbound US states in 2021: How do they examine on quite a lot of financial, tax, enterprise local weather, and political measures? | American Enterprise Institute

New US state inhabitants and state migration circulate knowledge for 2021 had been launched final week by the Census Bureau — “State Inhabitants Totals and Elements of Change: 2020-2021” — and that is an replace of my annual state migration evaluation that makes an attempt to reply the query: What important variations are there between America’s prime ten inbound and prime ten outbound states when they’re in contrast on quite a lot of measures together with political social gathering management of state authorities, enterprise local weather, particular person and company tax burdens, state fiscal well being, electrical energy and housing prices, financial outlook and efficiency, and labor market dynamism?

Based mostly on the Census Bureau’s measure of “Internet Home Migration” the highest ten inbound and prime ten outbound US states from April 1, 2020, to July 1, 2021, are displayed within the prime chart above (knowledge out there right here). (Observe that the format of the Census Bureau’s state inhabitants and migration knowledge has modified this yr from earlier years. My earlier annual migration experiences had been based mostly on the Census Bureau’s state-to-state migration flows, which haven’t but been up to date since 2019.) Inhabitants inflows to the highest ten inbound states vary from highs of 264,000 and 211,000 for No. 1 Florida and No. 2 Texas to a 34,280 influx to No. 10 Nevada, and outflows from the highest ten outbound states had been as excessive as 429,000 for No. 1 California, 406,000 for No. 2 New York and 153,300 for No. 3 Illinois. In whole, the highest ten inbound states gained barely greater than 1 million new residents from April 2020 to July 2021 and the highest ten outbound states expertise an outflow of almost 1.2 million residents.

Q: Based mostly on 2020-2021 web home migration flows from the Census Bureau knowledge, are there any important variations between the highest ten inbound and prime ten outbound states when they’re in contrast on quite a lot of measures of political social gathering management, enterprise local weather, enterprise and particular person taxes, fiscal well being, electrical energy and housing prices, financial efficiency and outlook, and labor market dynamism? Assuming that many People and US firms “transfer/vote with their ft” once they relocate from one state to a different, is there any empirical proof to counsel that People are shifting to crimson states which are comparatively extra economically vibrant, dynamic, and business-friendly, with decrease tax and regulatory burdens, decrease power and housing prices, with extra financial and job alternatives, from blue states which are comparatively extra economically stagnant with greater taxes and extra rules, greater power and housing prices, and with fewer financial and job alternatives?

The desk above (click on to enlarge) summarizes a comparability between the 2 teams of US states (prime ten inbound and prime ten outbound) on 14 totally different measures of state partisan composition, financial efficiency, labor market dynamism, enterprise local weather, electrical energy and housing prices, tax local weather, and financial stability for these ten states. And on every of these 14 measures, there’s empirical proof that the highest ten inbound states are on common out-performing the highest ten outbound states, suggesting that home migration patterns within the US do mirror People and companies “voting/shifting with their ft” from Democratic-controlled, high-tax, business-unfriendly, fiscally unhealthy, economically stagnant states with comparatively excessive electrical energy and housing prices to Republican-controlled, lower-tax, extra business-friendly, fiscally wholesome and economically vibrant states with decrease electrical energy and housing prices. Let’s evaluation these 14 measures, one by one:

1. Proper-to-Work. All ten of the highest inbound US states in 2021 are Proper-to-Work (RTW) states, whereas eight of the highest ten outbound states are forced-unionism states (all besides Louisiana and Michigan). In keeping with many research like this one by my AEI colleague Jeff Eisenach (emphasis mine):

There’s a massive physique of rigorous financial analysis on the results of
RTW legal guidelines on financial efficiency. General, that analysis means that RTW legal guidelines have a optimistic impression on financial development, employment, funding, and innovation, each instantly and not directly.

Due to this fact, it might make sense that American companies and staff are leaving low-growth, forced-unionism states for higher-growth, RTW states with extra dynamic labor markets and better job alternatives.

2. State Partisan Composition. The Nationwide Convention of State Legislatures recurrently tracks and experiences the social gathering management of state legislatures and governors. Based mostly on the 2021 state and legislative partisan composition, the desk above reveals that for the highest inbound states, Republicans management the legislatures in 9 of the ten states (all besides No. 10 Nevada) and eight of the inbound states have Republic governors. For the outbound states, Democrats management the legislatures of seven out of ten states (together with all the prime 5 outbound states) and eight out of 10 of the state governor’s places of work. Due to this fact, there appears to be robust proof that simply based mostly on political social gathering management on the state stage, tens of millions of People are shifting away from blue-controlled states to crimson states. In fact, there’s a robust correlation between blue/crimson management of state governments and variations within the different metrics that can be mentioned under together with state taxes, state enterprise climates, and financial efficiency and outlooks.  

3. State Tax Burden. Earlier this yr, Pockets Hub launched a examine on the “General Tax Burden by State” that measured the share of every state’s whole private earnings that goes to state and native taxes within the type of a) particular person earnings taxes, b) property taxes, and c) gross sales and excise taxes. The typical state tax burden for the highest ten inbound states was estimated to be 7.7% in comparison with a 9.9% common tax burden for the highest ten outbound states. Eight of the 12 US states ranked by the best whole state tax burden (New York, Hawaii, Connecticut, Minnesota, New Jersey, Illinois, California, and Maryland) had been within the ten highest outbound US states in 2021.

4. Revenue Taxes. a) In keeping with the Tax Basis, the typical prime particular person earnings tax fee within the prime ten inbound states was 3.8% in 2021 in comparison with a mean prime tax fee of greater than twice the 8.0% common for the highest 10 outbound states. 4 of the highest 10 inbound states — Florida, Texas, Tennessee, and Nevada — don’t have any state particular person earnings tax. The No. 1 outbound state – California – has the nation’s highest prime marginal state earnings tax fee at 13.3%, and never far behind are Hawaii and New Jersey at 11% and 10.75% (the one different states with the best marginal earnings tax charges in double-digits) and Minnesota at 9.85%.

b) Equally, the typical prime company tax fee based mostly on Tax Basis knowledge within the prime ten inbound states was 4.1% final yr in comparison with 8.3% within the prime ten outbound states. Two of the highest inbound states — Texas and Nevada — don’t have any state company earnings tax. It’s an ironclad legislation of economics that in the event you tax one thing you get much less of it, and it’s subsequently, no shock that People and companies are leaving comparatively excessive tax states for comparatively low tax states (for each particular person and company taxes).

5. Forbes Greatest States for Enterprise. Based mostly on its most up-to-date annual state rating that measures six enterprise classes: enterprise prices, labor provide, regulatory surroundings, present financial local weather, development prospects, and high quality of life, Forbes rated North Carolina, the No. 4 inbound state in 2021, once more as the very best US state for enterprise final yr. Six of the opposite US states within the prime ten inbound states (Texas, Utah, Florida, Georgia, Tennessee, and Idaho) ranked within the prime ten greatest US states for enterprise based on Forbes, and all the prime ten inbound US states in 2021 ranked within the prime one-third of Forbes’ greatest states for enterprise. The typical Forbes rating for the highest ten inbound states final yr was 8 out of fifty in comparison with the typical rating of 33 out of fifty for the highest ten outbound states. For the class “Enterprise Price” within the Forbes examine 4 of the highest inbound US states — Texas, North Carolina, Nevada, and Tennessee — ranked within the Forbes’ prime ten for that class. Not surprisingly, 4 of the highest outbound states in 2021 – California, Massachusetts, New Jersey, and Hawaii — had been ranked from No. 47 to No. 50 by Forbes because the 4 US states with the best enterprise prices.

6. Enterprise Tax Local weather Rankings. Yearly The Tax Basis calculates and experiences its State Enterprise Tax Local weather Index based mostly on every US state’s company earnings taxes, particular person earnings taxes, gross sales taxes, property taxes, and unemployment insurance coverage taxes. In the latest Tax Basis rankings, three of the highest ten outbound states (New York, New Jersey, Connecticut, and California) had been the three US states with the worst enterprise tax local weather and three different states (Louisiana, Hawaii, and Minnesota) had been among the many ten US states with the worst enterprise local weather.

For the highest ten inbound states, 4 (Florida, North Carolina, Utah, and Nevada) had been within the prime ten US states for the very best enterprise local weather, and all inbound states besides South Carolina had been within the prime half of US states for the very best enterprise tax local weather. The typical enterprise tax local weather rating for the highest ten inbound states was 17 (prime half) in comparison with a mean rating of 39 (backside one-quarter) for the highest ten outbound states (the place a rank of 1 is the very best enterprise tax local weather and 50 is the worst).

7. State Fiscal Stability Rankings. US Information and World Report lately ranked US states by “fiscal stability” based mostly on each a short-term and long-term foundation. State credit score rankings and public pension liabilities measure long-term monetary well being, whereas asset liquidity and a state’s price range administration (spending vs. income) are used to measure short-term well being. In keeping with the report, “The fiscal stability of a state’s authorities is significant to making sure the success of government-sponsored packages and tasks and the standard of lifetime of the state’s residents.”

Six of the highest inbound states are ranked within the prime 10 US states for the best stage of fiscal stability (Tennessee, Idaho, Utah, North Carolina, Florida, and Texas). Three of the highest ten outbound states had been among the many 5 US states with the worst fiscal stability rankings – Illinois (No. 50 for fiscal stability), New Jersey (No. 49), New Mexico (No. 47), and Connecticut (No. 46). The typical fiscal stability rating for the highest ten inbound states was 15 (prime one-third) in comparison with a mean rating of 38 for the highest ten outbound states (backside one-quarter), suggesting that the fiscal situation of the highest inbound states is considerably extra steady and sound than the situation of the outbound states.

8. The Common Electrical energy Price by state is one other issue that may contribute to companies and households shifting from states with comparatively excessive power prices to states with decrease power prices. In keeping with knowledge from the Vitality Info Administration on the “Common Value of Electrical energy to Final Clients,” the typical value of electrical energy in October 2021 for all sectors (residential, industrial, industrial, and transportation) was 9.63 cents per kilowatt-hour for the highest ten inbound states final yr. For the highest ten outbound states, the typical price of electrical energy in 2021 was 15.74 cents per kilowatt-hour, which is 63.4% greater than the highest ten inbound states. The 2 US states with the best electrical energy prices (apart from Alaska and Hawaii) are California and Massachusetts and people two states had been among the many prime ten outbound states final yr. As a result of electrical energy prices have an effect on each the price of residing for households and the price of operation for companies, it’s not shocking that the states with the best electrical energy prices are shedding inhabitants to states with decrease power prices.   

9. Median Residence Value by state is one other new measure that would have an effect on US migration patterns, and it does seem that People are leaving states with excessive housings prices to maneuver to states with decrease median residence costs. The median residence costs by state within the desk above are from Zillow and present for the highest ten inbound states, the typical of the median residence costs for these states is $343,519 in comparison with $423,548 for the highest ten outbound states. The median residence within the prime ten outbound states is $80,000 (and 23%) better on common than for the highest ten inbound states, which might partly clarify the outbound migration from states with excessive housing prices to states with decrease housing prices. Based mostly on a ten% down fee and a 4% 30-year fixed-rate mortgage, annual housing prices within the prime ten inbound states could be greater than $4,000 decrease than the highest ten outbound states.  

10. Financial Outlook and Efficiency. The final three classes above present financial outlook and efficiency measures for every of the 20 states based mostly on (a) the Wealthy States, Poor States: ALEC-Laffer State Financial Competitiveness Index that ranks the financial competitiveness and outlook of every state, (b) the typical state unemployment fee in 2020, and c) the annual employment development by way of November 2021.

The Wealthy States, Poor States “financial outlook” is a forward-looking financial forecast measure based mostly on the state’s standing in 15 vital state coverage variables. For 2021, the typical financial outlook rating for inbound states (1 = greatest and 50 = worst) was 10 (prime one-fifth) in comparison with a mean rating of 39 for the outbound states (backside one-quarter). 5 of the inbound states ranked among the many prime ten US states for the very best financial outlook (Florida, Texas, North Carolina, Utah, and Nevada. Utah and Florida led the rankings as the 2 US states with the very best financial outlooks. In distinction, 7 of the ten outbound states (California, New York, Illinois, New Jersey, Maryland, Hawaii, and Minnesota) ranked between No. 40 and No. 50 as states with the worst financial outlooks.

For the highest ten inbound states, the typical jobless fee in 2020 was 7.4% (under the nationwide common of 8.1%), and the typical annual job development by way of November 2021 was 4.0%. In distinction, the typical unemployment fee final yr was 9.1% (above the 8.1% nationwide common by a full share level), and a couple of.5% for annual job development by way of November 2021. In different phrases, in comparison with the highest outbound states, the typical jobless fee for the inbound states was almost two share factors decrease (7.4% vs. 9.1%) and annual employment development was greater by 1.5 share factors (4.0% vs. 2.5%).

These three vital financial indicators counsel that the highest ten inbound states are stronger economically on common than the highest ten outbound states with a lot stronger financial outlooks and extra sturdy labor markets with decrease jobless charges and better charges of job creation.

Backside Line: Based mostly on detailed state-to-state migration knowledge in 2021 from the Census Bureau, the migration patterns of US households (and companies) adopted predictable patterns, reflecting variations amongst states in state political management, financial development and outlooks, tax burdens, enterprise local weather, power and housing prices, labor market robustness, and financial stability. To reply the questions posed above, there are important variations between the highest ten inbound and prime ten outbound states when they’re in contrast on quite a lot of 14 measures of state political partisanship, financial efficiency and outlook, enterprise local weather, tax burdens for companies and people, fiscal stability, electrical energy and housing prices, and labor market dynamism. There may be empirical proof that People and companies “vote with their ft” once they relocate from one state to a different, and the proof means that People are shifting from blue states which are extra economically stagnant, fiscally unhealthy states with greater tax burdens and unfriendly enterprise climates with greater power and housing prices and fewer financial and job alternatives, to fiscally sound crimson states which are extra economically vibrant, dynamic and business-friendly, with decrease tax and regulatory burdens, decrease power, and housing prices and extra financial and job alternatives.

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