This Thanksgiving, I enjoyed 70-degree weather on the coast of California. 48 hours later, I was driving home to Utah in a blizzard wondering why we’d left the Golden State, and why in the world Californians would ever want to move. The answer: state taxes.
In 2023, California saw a net interstate migration loss of 158,220 tax filers – the highest loss in the nation. Idyllic weather aside, that’s no surprise considering 13.30% state income tax rates, the highest gas tax rates in the nation and an average sales tax rate of 8.85%.
By contrast, Utah saw a net interstate migration gain of 6,965 tax filers (#14 for number of filers gained), for an AGI gain of $1,639,756,000 (#10 for AGI gain). In other words, Utah not only attracted interstate migrants, but attracted high-income interstate migrants whose incomes will now be taxed by Utah entities, spent in Utah businesses, and benefit Utah residents. This is exactly the kind of behavior a state like Utah wants to encourage to promote economic output and economic growth over time.
In a dramatic example of how taxes affect interstate migration, consider Jeff Bezos, who – amid, though perhaps not because of, discussions to impose a hefty wealth tax in Washington state – moved from Washington to Florida (a notoriously low-tax state). Not only will Washington forgo the estimated annual $1.44 billion he would have paid in the new wealth tax (around 45% of the projected revenue), it will also lose his spending, property tax and eventual estate tax. His move is a significant loss to Washington, and is only the first of many such departures if the state continues its current trajectory.
According to the Tax Foundation, “there is a strong positive relationship between state tax competitiveness and net migration. Overall, states with lower taxes and sound tax structures experienced stronger inbound migration than states with higher taxes and more burdensome tax structures.”
Utah has established itself as a state with sound tax structures and lower taxes; however, neighboring states like Nevada and Wyoming impose no income taxes, Arizona is aggressively cutting their income tax, and even Colorado imposes a lower income tax than Utah’s current rate of 4.65%. To remain a desirable landing spot for would-be interstate migrants, Utah needs to compete. That means finding ways to reduce the tax burden on those who live here.
The lesson? Money talks. It says, “leave California and move to Utah. Sure, the winter is freezing and the Jazz won’t make the playoffs, but it’s a low-tax state where you can keep what you earn and spend it where you want.” Let’s keep money talking and saying good things about our state.