A new snapshot of America’s changing population is providing new fodder in the ongoing debate over whether or not state and local taxes get a person moving from place to place.331.4 million people now live in the United States, based on initial 2020 Census results. The 7.4% population increase from 2010 was primarily due to population growth in the South and West, where rates of growth were 10.2% and 9.2%, respectively.
In contrast, the Northeast experienced a 4.1% growth rate and the Midwest had a 3.1% growth rate in that time. Texas and Florida, two of the six states that will add seats to the U.S. House of Representatives due to population growth, also do not collect state-level income taxes. Texas is bringing in two new seats for Congress and the Florida delegation is winning one. On the other hand, California and New York, two of the seven states poised to lose a seat in Congress, have state income tax rates that can hit double-digit percentages for their highest incomes. (In fact, New York City millionaires now face the highest combined city and state tax rate in the country.) So how do you interpret those results, especially at a time when the Biden administration’s plans for infrastructure investments and families are putting the spotlight on potential tax increases for the wealthy and corporations? It all depends on who you ask. “People are moving to states that are economically dynamic,” said Jared Walczak, vice president of state projects for the Tax Foundation, a right-wing think tank. Those are places with lower taxes, fewer business regulations and zoning rules, he said. “This has the potential to go from a drip to a flood after a pandemic, as remote work is significantly more viable than ever,” Walczak added. Growth in the United States’ Sun Belt, which includes Florida and Texas, has been driven for decades by “tailwinds,” including a lighter tax burden, some observers say. Of course, all kinds of factors influence a moving decision, Walczak acknowledged. But taxes are “one of the reasons, and it’s a constant correlation” with moving decisions. New York ranked first and California ranked eighth in a Tax Foundation score in the states with the heaviest combined state and local tax burden as of 2019. Florida ranked 43rd and Texas ranked 47th, based on rankings. published in March. Carl Davis, director of research at the Institute on Taxation and Economic Policy, a left-wing think tank, views the census results very differently. “I don’t really see a tax story here,” he said. Weather and house prices are much stronger ingredients in moving decisions than tax bills, he said. In addition, the latest census figures sustained the long-standing trend of massive population growth in the South and West, Davis noted. Between 2000 and 2010, the South grew 14.3% and the West grew 13.8%, while the Northeast grew 3.2% and the Midwest grew 3.9%, census data shows. . When it comes to head of state counts and fiscal rules, Davis said, “There are so many examples going in the other direction. It’s hard to see a significant trend here. ”For example, New Hampshire has no income taxes on wages, but New Jersey does, and in fact recently had its top rate for the super-rich applied much earlier. 2020 census shows New Jersey’s population grew at 5.5%, slightly faster than New Hampshire’s 4.3% growth rate. Alaska, Nevada, South Dakota, Washington, and Wyoming are also taxed. on income. New Hampshire and Tennessee only tax investment income. Neither state got seats after the 2020 count, but Nevada was the fifth-fastest-growing state in the country. ‘There are so many confounders.’ North, Colorado, Oregon, and Montana are the other states poised for a seat each, based on the 2020 census count. North Carolina has a flat tax rate of 5.25% and Coloradans voted in the last elections to cut your income tax from 4.63% to 4.55%. Oregon and Montana have rising rates peaking at 9.9% and 6.9% respectively. Michigan, Ohio, Pennsylvania, Illinois and West Virginia rounded out the states that lost a seat, based on the 2020 tally. Michigan, Pennsylvania and Illinois all have fixed fees, with the highest of the three being Illinois’s 4.95% fee. Both Ohio and West Virginia have tiered rates, and West Virginia has the highest top rate of the two, at 6.5%. “There are so many confounders” that it makes it difficult to distinguish tax trends from data in motion, said Whitney Afonso, a professor at the University of North Carolina at Chapel Hill School of Government. That is not to say that trends are impossible to spot. When Afonso analyzed Connecticut‘s adoption of an income tax in 1991, he did not find an exodus from the state, but concluded that it deterred some people from moving. Meanwhile, other investigations in other states have not suggested a flight from taxes, he noted. A Cornell University professor even wrote a 2017 book called “The Myth of the Millionaire Tax Flight,” based on his review of millions of high-income records. The “result is mixed in the literature, and some of them are very difficult to control,” Afonso said. One thing is for sure. Even if it’s unclear how much weight state fiscal rules have in change decisions, Afonso said politicians are trying to frame them as a way to attract residents and businesses. North Carolina lawmakers were “very intentional when they changed their tax policies about a decade ago,” he said. Earlier this week, Apple AAPL, -0.24% announced that it was building a new company site in North Carolina. That residency-tax link is also happening at the federal level, but to support more taxes on the wealthy. Sen. Elizabeth Warren appeared on CNBC on Tuesday, before a hearing on the implementation of a fairer federal tax code. Warren, a progressive Democrat, supports a wealth tax that would impose a 2% tax on wealth above $ 50 million and 3% above $ 1 billion. Part of the reason for a wealth tax, he said, was “so there won’t be any difference between whether you live in Massachusetts, or you live in Montana, or you live in Mississippi. You have to pay the estate tax. That way it’s there for all of us, and that way we can make those investments collectively. ”