As High-tax States Lose Residents, Low-Tax States Gain

Modern street of typical middle class desert homes near Las Vegas Nevada.

Modern street of typical middle class desert homes near Las Vegas Nevada. iStock.com/trekandshoot

 

Connecting state and local government leaders

About 20% of homebuyers cite lower taxes as the main reason they move to another state, but there are several other important factors, according to a recent analysis.

In high-tax states, an average of 2.5 residents leave for every one person who moves in, while four people move in for every one person who leaves low-tax states, according to an analysis by Redfin, a real estate brokerage firm. 

The Redfin analysis is based on estimated migration to and from 48 states from 2013 to 2020, correlated with sales, income and property tax rates in 2020. For the national average, the 15 states with the lowest taxes are considered low-tax states and the 15 states with the highest taxes are considered high-tax states. 

Among the low-tax states cited for attracting new residents are Nevada, Florida, South Carolina and Texas. According to the analysis, Nevada gained more residents than any other state during the last eight years—for every nine people who moved into Nevada from 2013 to 2020, just one person left. Nevada has the sixth-lowest tax rate in the country, according to Redfin. 

States with high taxes tend to lose residents. New York, which has the sixth-highest tax rate, lost more residents than any other state from 2013 through 2020. For every eight people who left, just one person moved in. Illinois and New Jersey also are among the top four states in terms of higher taxes and people moving away. 

There are a few exceptions, the analysis shows. Arizona, Idaho and Colorado have high taxes but high numbers of Americans move in from other states. 

One-in-five homebuyers attribute lower taxes as one reason for their decision to move to a different state. The only factors more common than low taxes are proximity to family, living somewhere more affordable and owning a bigger house.

The analysis comes as state legislatures have implemented or are considering tax policy changes that will impact their states’ budgets in fiscal year 2022. As well, changes to policies like SALT taxes could decrease the number of people moving out of high-tax states. 

The data in the Redfin report is from an analysis of net migration to and from 48 states from 2013 to 2020. Hawaii and Alaska are excluded because they’re extreme outliers in terms of migration. 2020 migration rates are estimated based on an analysis that combines Redfin user data with U.S. Census Bureau statistics.

To see more on this analysis click here

Brent Woodie is an associate editor at Route Fifty.

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