Connect the dots

In recent months, a number of important firms have announced they are relocating from California to Texas. An article by Peter Yared discussing this trend had a graphic that caught my eye:

The movement of these industries is toward three states that have one thing in common—no state income tax. And these are the only three states with no income tax in the southeastern quadrant of the US—say Texas to Florida and south of the Ohio River.

Progressives often discount the supply side effects of tax changes, pointing to examples such as Kansas where tax cuts had little effect.  But Kansas lacks the sort of big cities that would typical draw these firms and its tax cuts were relatively modest.  If you are looking for a low tax state on the Great Plains, South Dakota has no state income tax at all.  The top rate in Kansas (5.7%) is higher than in Massachusetts (5.0%).  That won’t get the job done.

Miami clearly benefits from a mild climate, but Tennessee and Texas have climates that are only average for a southern state.

I’m certainly not a rabid supply sider who thinks that tax rates are all important.  But a person would have to be pretty blind to ignore the migration of firms from places like New York, New Jersey and California, to lower tax places.

Interestingly, Washington State has no income tax, which is unique for a northern state with a big city.  Washington is also home to the two of the three richest people on the planet (the other–Elon Musk–just announced he’s moving from California to Texas.)  Beyond these anecdotes, Washington is also experiencing rapid population growth, which is unique for a northern state with a big city.  Indeed it’s growing even faster than Oregon, which has a slightly nicer climate.

There’s no doubt that climate has been reshaping America in the decades since air conditioning was invented, with people moving to warmer locations.  But for the first time ever (AFAIK), California saw its population fall last year, and it has a delightful climate (even with the recent forest fires.)  High tax Hawaii also lost population.

So while people are gradually moving to warmer locations, state tax policies explain why certain states attract a disproportionate share of the migrants.  Indeed, last year more that half of the US population growth occurred in just two states—Texas and Florida.  I believe that’s the first time that has ever happened.  Add in Tennessee and Washington and you are at nearly two thirds of the nation’s population growth.  Recent limits on the deductibility of state and local taxes has exacerbated this trend.

PS.  Technically, Tennessee has no wage tax.  However, they do tax interest and dividends at 1%.  But even that small tax is being phased out at the end of this year.

PPS.  Yes, housing policies are another big factor in migration—especially for the middle class.

Happy Holidays everyone!

 

 

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Vaccine incentives matter (from my email)

I am a physician in private practice in [redacted]. We have just been approved to order and administer the vaccine to tier-appropriate patients. Medicare has approved a payment of 18$ for the first shot and 28$ for the second. As far as we can determine we will not be allowed to bill for an office […]

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It’s Not Just Christmas Today, but EVERYDAY!

Christmas is not only a time for rejoicing and celebration, but also a time of gratitude for what we have. In times such as these, in which all of us have been affected by the circumstances related to COVID-19, this is all the more important. It’s for this reason I would like to point out that it’s not only Christmas today, but every day. What do I mean by this? To answer this question, I’ll provide a lesson from my mother.

My mother was born in a town called Carini, in the Province of Palermo, Sicily. She was born and grew up in a home with no car, no television, and no air conditioning. After she migrated to the United States in 1971, see never thought of returning to her hometown, and always reminded us how wonderful life in America is.

It was 30 years today that she imparted on me a lesson, one that I will never forget and that I only fully appreciate now. It was an important lesson of economic development and the blessings of a free society that she taught me, even though my mom never made it to high school. She would reflect on her own childhood, telling us that the smell of oranges would remind her of Christmas.

What’s baffling about this story is that, even before my mom was born and to the present day, Sicily remains the largest producer of oranges in Italy, and a major producer of oranges and other citrus fruits worldwide. You’d think, in spite of the poverty within which she was raised, she would enjoy oranges on a more regular basis. Yet, today, most us enjoy (or can enjoy at little cost) and take for granted what had been a luxury that was consumed during Christmas, even amongst those residing in a part of the world where they were grown in relative abundance.

My intention here is neither to secularize nor undermine how special and joyous the Christmas season is. Rather, it is to express gratitude and place in perspective what the beneficial consequences of economic development are, and not to take for granted how new in the history of humankind our way of life is, even during times as hard as this. The point here is that one of the fruits of economic development, and the institutional preconditions that facilitate it, namely private property and freedom of contract under the rule of law, not only provide the framework to practice religious freedom, but also allows the masses of the population to get just not a smell, but a taste of Christmas every day.

 


Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and Associate Director of Academic and Student Programs at the Mercatus Center at George Mason University

 

 

 

 

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