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the virtues of federalism
States with the Highest Taxes Have a Desirability Problem

A recent Gallup survey finds that people who live in states with the highest taxes (including income, property, and sales taxes) are more likely to want to head for the exits than people who live in states that let them hold on to more of their earnings:

Approximately a quarter (26%) of residents who live in states with the lowest tax burden say they would like to leave their state. And this rate generally holds for residents in the second and third quintiles. However, there is a three-percentage-point increase to 31% among fourth-quintile states and an even greater jump to 36% among the fifth quintile. Even after controlling for various demographic characteristics including age, gender, race and ethnicity, and education, there is still a strong relationship between total state tax burden and desire to leave one’s current state of residence.

The survey only measured the expressed desire to leave—not the commitment to doing so. Indeed, Gallup reports that “only 12% of Connecticut residents who report they would like to move say they plan to do so in the next 12 months.” Still, even if most of those who say they want to leave never actually do, the correlation between tax burden and dissatisfaction with the state is striking. And even though this finding might seem relatively straightforward—Americans don’t like taxes, after all—three further points seem worth making.

First, if you look at the data, you’ll see that people living in the ten lowest-taxed states wanted to leave their state in the same ratio (26 percent) as people living in the next 10 states (the second quintile), and only marginally less than the people in the next 10 (the third quintile). So it may be that level of taxation doesn’t matter so much—at least in terms of state desirability—until it gets above a certain level. The people living in the ten-highest taxed states are significantly more likely to want to leave than anyone else.

Second, the data casts doubt on one of the assumptions underlying blue model governance: Namely, that Americans don’t mind high taxes so long as they also are promised high levels of security and lots of public services in return. High-tax states like Illinois and New York (fourth and fifth tax quintiles, respectively) both have relatively generous welfare programs and large public sectors, and yet they both rank in the top 10 of states people are most likely to want to leave. Material security isn’t the only thing that matters; Americans value autonomy as well. (It’s also possible, of course, that the corruption and inefficiency endemic to these states makes residents feel that they aren’t getting a good return for their money, and that well-administered high-tax states would see more support).

Third, the data highlight the virtues of federalism, which makes it possible for people who do choose to leave to vote with their feet. The existence of this option has probably helped keep tax rates lower overall.

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