Americans Continue Voting With Their Feet In Favor Of Lower Taxes & Against Coerced Unionization

For years Americans have been voting with their feet in favor of lower-taxed states where they’re not forced to join a union as a condition of employment. New migration data shows this trend has continued apace since the onset of the pandemic. What’s more, recent developments in the blue states that are losing the most people indicate that lessons have not been learned by some policymakers and that the flight of Americans from high-tax states run by Democrats to lower-taxed states run by Republicans could continue for quite a while. 

“Migration to southern states continues to be magnified by the lingering pandemic, and no state netted more U-Haul customers during the last year than Texas,” the moving company reported on January 3. Texas and two other no-income-tax states — Florida & Tennessee — rounded out the top three states that netted the most U-Haul customers in 2021. South Carolina ranked as the number four U-Haul growth state and Arizona came in at number five. 

“Growth states are calculated by the net gain of one-way U-Haul trucks entering a state versus leaving that state in a calendar year,” the trucking company explains. “Migration trends data is compiled from well over 2 million one-way U-Haul truck customer transactions that occur annually.” 

Whereas the top U-Haul growth destinations are red and relatively low-tax states, high-tax blue states were the biggest losers in the U-Haul ranking. The company notes that “California is 50th and Illinois 49th on the list for the second consecutive year, indicating those states once again witnessed the largest net losses of one-way U-Haul trucks.” California’s numbers could have been worse had U-Haul not run out of trucks to help people flee the Golden State. 

“California remained the top state for out-migration, but its net loss of U-Haul trucks wasn’t as severe as in 2020,” explains U-Haul. “That can be partially attributed to the fact that U-Haul simply ran out of inventory to meet customer demand for outbound equipment.” 

The new U-Haul figures were released a few weeks after the U.S. Census Bureau’s new domestic migration numbers were published. Those Census figures, like the U-Haul data, show Americans voting with their feet in favor of lower-taxed, red states at the expense of high-tax, blues states. 

American Enterprise Institute senior fellow Mark Perry examined the 10 states losing the most people and the 10 gaining the most to see what policy features they have in common. Perry’s findings suggest that, as he puts it, “Americans are moving from blue states that are more economically stagnant, fiscally unhealthy states with higher tax burdens and unfriendly business climates…to fiscally sound red states that are more economically vibrant, dynamic and business-friendly, with lower tax and regulatory burdens.”

Perry points out that the “average state tax burden for the top ten inbound states was estimated to be 7.7% compared to a 9.9% average tax burden for the top ten outbound states.” Meanwhile, Perry found that “eight of the 12 U.S. states ranked by the highest total state tax burden…were in the ten highest outbound US states in 2021.”

Whereas the states gaining the most people last year had lower overall tax burdens, they also had lower individual state income tax rates on average. 

“The individual income tax is only one component of overall tax burdens, but it is often highly salient, and is illustrative here,” writes Jared Walczak, Tax Foundation’s Vice President of State Projects. “If we include the District of Columbia, then in the top one-third of states for population growth since the start of the pandemic (April 2020 to July 2021 data), the average combined top marginal state and local income tax rate is 3.5%, while in the bottom third of states, it is about 7.3%.”

The states gaining the most people also levy lower tax rates on corporations. In the states with the highest inbound population, “the average top corporate tax rate based on Tax Foundation data in the top ten inbound states was 4.1% last year compared to 8.3% in the top ten outbound states,” writes Perry. While the top inbound states have lower taxes than the top outbound states, the top inbound states also have lower energy and housing costs. 

“For the top ten outbound states, the average cost of electricity in 2021 was 15.74 cents per kilowatt-hour, which is 63.4% higher than the top ten inbound states,” writes Perry. Meanwhile, Perry points out that the median home price in the top ten outbound states is 23% greater than the average median home price in the top ten inbound states. 

The top 10 outbound and inbound states also differ greatly when it comes to labor policy. All of the top inbound states allow workers to decide for themselves whether or not to join and fund a union. In most of the top outbound states there is no Right-to-Work law, which means workers can be forced to join and fund a union as a condition of employment. 

“All 10 of the top inbound US states in 2021 are Right-to-Work (RTW) states,” writes Perry, “while eight of the top ten outbound states are forced-unionism states.” 

Joe Biden & Congressional Democrats Seek To Mute Red State Policy Advantages 

These fiscal and labor policy commonalities among the states with the highest inbound migration, particularly the freedom to work without being coerced to join a union and relatively low tax rates, are the very state policies that President Joe Biden and congressional Democrats are seeking to nullify and control from Washington. In fact, the Biden White House and congressional Democrats have taken action to prevent state lawmakers from cutting state taxes and to prevent states from even having Right-to-Work laws. 

The number of Right-to-Work states has increased from 22 to 27 over the past decade and the legislative majorities who enacted those laws have been been elected by their constituents to remain in power, an apparent affirmation of public support for the enactment of Right-to-Work. President Biden and congressional Democrats, meanwhile, want to overturn all state Right-to-Work laws from Washington, which is what would happen if the PRO Act, which has been endorsed by President Biden and passed by the U.S. House, were to become law. 

The PRO Act isn’t the only way in which President Biden and congressional Democrats are seeking to dictate state policy and reverse trends. The American Rescue Plan Act, the $1.9 Trillion spending bill approved in March 2021, included a provision that sought to prohibit state lawmakers from enacting state tax relief. Legal challenges to that provision brought by state attorneys general across the country so far have been successful in nullifying this federal attempt to dictate state tax policy. 

Meanwhile legislators in many states have simply ignored the new federal ban on state tax relief, which critics believe will ultimately be completely struck down in court as unconstitutional. Lawmakers in 14 states enacted income tax relief in 2021, with three Democratic governors signing state income tax cuts into law. North Carolina Governor Roy Cooper (D) even signed a full phaseout of his state corporate income tax. As Tax Foundation’s Walczak notes, lawmakers in the states that have been gaining the most people continue to pursue reforms that make their tax climates even more welcoming:

“Not content to rest on their laurels, nine states in the top third either implemented or enacted individual or corporate income tax cuts in 2021. Only two states in the bottom third did so, and in one (Louisiana), commensurate base broadening, while good policy, made the reform essentially revenue neutral. Meanwhile, New York and the District of Columbia actually raised income taxes in 2021, the only places to do so.”

While states that have been gaining the most people are becoming even more attractive thanks to reform-minded legislators and governors, lawmakers in blue states that have been losing the most people don’t seem to be learning many lessons and in some cases are doubling down on policies that many believe have helped drive people away. Aside from the aforementioned income tax increases in D.C and New York, the single-payer health care bill introduced the California legislature, Assembly Bill 1400, and the tax increases associated with it are an example of this. AB 1400 and the tax hikes proposed to fund it would double state tax collections in California, imposing the largest state tax hike in U.S. history. 

AB 1400 and the constitutional amendment that would raise taxes by $163 billion annually to fund the state’s single-payer health care program, if enacted, would leave California with a new 18.05% top marginal income tax rate. The 2.3% gross receipts tax proposed in California is three times larger than any of the seven gross receipts taxes currently on the books in the U.S. The proposed tax hikes would cost the average California household $12,250 annually. Even Democrats in Sacramento are skeptical about the proposal. 

“I just worry whether we have the capacity to manage this,” California Assembly Health Committee Chairman Jim Wood (D-Sonoma County) told the Los Angeles Times’ George Skelton. 

“I look forward to hearing Democrats explain how they plan to successfully take over more than 10% of the state’s economy when in the last decade they’ve proven themselves incapable of simple things like building a railroad, providing clean drinking water, keeping the lights on and filling potholes,” said Republican Assembly Leader Marie Waldron. 

In order to become law this year, AB 1400 must be passed out of the Assembly and sent to the California Senate by January 31. If that happens, the big debate over final passage will come later in the summer. If signed into law by Governor Gavin Newsom, AB 1400 would only take effect if the associated tax increases are approved by voters. If this bill and the massive tax hikes it imposes were to become law, many expect that would exacerbate California’s population loss. “Practically doubling state taxes—even if the burden is partially offset through state-provided health coverage—could send taxpayers racing for the exits,” writes Walczak. 

“It almost seems as if politicians in California are trying hard to push their people and their businesses to other states,” said North Carolina Representative Jason Saine (R). “When you look at the tax differences between North Carolina and California, it easily explains why so many have fled and arrived here and in other states that support economic freedom through a reasonable tax environment.” 

While passage of AB 1400 and the associated tax increases would take a heavy toll on California taxpayers, lawmakers in others states stand ready to welcome more new residents who are fleeing heavy handed policies in California and other blue states. 

“California keeps shutting the door and we continue to cut ribbons welcoming their citizens and their businesses to North Carolina,” adds Representative Saine, expressing a sentiment that is shared not only by his colleagues in the Tar Heel State, but also by his counterparts in Tennessee, Florida, Texas, Arizona, and many other red states.