Everyone complains about taxes. But millions of American households apparently are doing something about it: Picking up and moving.
A CNBC analysis of tax data and figures provided by two major national moving companies shows that states with the highest per-capita taxes, for the most part, are also seeing the biggest net migration out of those states.
Take Connecticut, for example.
Earlier this week, the Nutmeg State’s legislature approved a collection of new taxes to close a two-year, $40 billion budget to help pay the multibillion-dollar tab to repair and replace the state’s dilapidated roads and bridges. The package includes a 50-cent-per-pack hike in cigarette taxes and a bump in tax rates on corporations and the state’s wealthiest earners.
The budget battle drew heated debate, along with threats from large employers like General Electric, which issued a rare statement that it might consider moving its Fairfield headquarters.
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Republican opponents warned that the tax hikes would likely drive residents to flee to lower-tax states. One legislator suggested that a local moving-and-storage company up for sale should do a booming business moving households from the state.
“I think the best buy in Connecticut right now is a business for sale in Westport,” Michael A. McLachlan, R-Danbury, told the AP earlier this month as the debate wore on. “For $650,000, a sharp investor can get up and increase this business into a mega moving company, because that’s what people are going to be doing, starting today.”
Based on an analysis of 10 years of tax data and the figures provided by United Van Lines and Atlas Van Lines, Sen. McLachlan may be on to something.
In states with the highest taxes—per person—the number of moving out of the state are greater than the number of people moving in.
Connecticut taxpayers, for example, paid an average of $4,431, according to data from the Federation of Tax Administrators, a group that represent state tax officials. Last year, United Van Lines and Atlas Van Lines, the two largest movers in the U.S., moved 3,212 households out of state and 2,368 moves inbound. That means 55 percent of all moves left the state, for a net outbound flow of 58 percent. Over the last decade, the two companies reported 36,837 moves outbound to 30,426 inbound, for a net outbound flow of 55 percent.
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The same pattern shows up in other high-tax states, like New York, New Jersey and Massachusetts.
Of course, the flow of households only reflects the migration patterns of people who hired these two moving companies and may not track overall population shifts.
The pattern doesn’t hold true for all states. Vermont and Alaska, with the second- and third-highest per-capita taxes, are still seeing net inbound moves, based on van line data.
While high taxes likely prompt some people to move, there may be other reasons why highest-tax states are correlated with net in-migration of households. One reason, according to Moody’s analyst Marcia Van Wagner, is that older states like Connecticut have bigger bills to pay than younger states that don’t have large legacy costs, like 100-year-old bridges.
“These older states have more built-up infrastructure and greater replacement needs compared to newer states with growing populations who haven’t built up the level of debt yet,” she said. “So you would expect the growing states to eventually build up those kinds of debt burdens, because they still need to build roads and schools.”
While per-capita tax data represents total taxes collected per person, it doesn’t always reflect the tax burden on individuals, because it also includes corporate taxes. States like Alaska and North Dakota, which have high per-capita taxes overall, generate large revenues from taxes on oil and gas production, which lowers the burden on individuals.
There’s also a wide range of mixes of different types of taxes, which create varying burdens on individuals from one state to another. Some states, like Florida, Washington, Texas, Nevada and South Dakota, generate the bulk of their revenues from sales taxes, which tend to shift the burden onto lower-income households. Others, like Oregon, Virginia, New York, Massachusetts, California and Connecticut, generate roughly half—or more—of their revenues from individual income taxes.
While states cut spending sharply following the Great Recession, most have stabilized their budgets and have begun seeing tax revenues rise again. While some like Connecticut have raised rates, much of the increase is being generated by the growth in employment and consumer spending, which generates higher sales and income taxes.
Sales, personal and corporate income taxes—which account for about 80 percent of states’ general fund revenues—are expected to hit $613 billion in the year that ends this month, up 4.2 percent form a year ago, according to the National Association of State Budget Officers. That compares with a 2.44 percent gain last year.
The biggest gains this year are expected from personal income taxes (up 4.7 percent) and sales taxes (up 4.0 percent), according to NASBO. Corporate income taxes, which make up about 6 percent of general funds, are expected to rise by 1.7 percent.