We know, immigration is a hot topic in the United States.
And of course it's a polarizing subject.
You might be in favor of or against it, but you’re unlikely to remain neutral.
You probably also think that immigration is either an opportunity or a threat.
However, dear folks of VisualPolitik, in the
United States there’s another kind of immigration that isn’t talked about much, but which
involves a huge flow of people moving from one territory to another every year.
I’m talking about inter-state immigration, the kind of immigration that happens between
the states that make up the country as a whole.
Something that creates winner and loser states.
Also, folks, after Donald Trump and the Republican Party’s latest fiscal reform, everything
indicates that this type of immigration is going to grow.
Obviously, as you can imagine, people tend to immigrate to the most prosperous territories.
So, here are a few questions that you might be asking yourselves:
What inter-state immigration trends are happening in the United States?
What does this type of immigration entail?
Which states are the winners and which are the losers?
Why? and...
What can we expect in the future?
Well, let's see.
(WINNERS AND LOSERS)
Every year, millions of Americans pack up their bags and move to another state.
And, logically some states have positive immigration balances every year.
That is to say, year after year more compatriots arrive than leave.
And also, of course, the opposite happens.
Some states see many residents move to another state every year, many more than those who
arrive.
Because states compete with each other.
Of course, each state has its own characteristics, its own regulations, taxes, policies… and
logically this makes some states more prosperous than others.
Obviously people tend to move to more prosperous places, to states where there’s more work,
better living conditions, and where more companies are being established.
Well, according to data from the IRS, or Internal Revenue Service, the federal government agency
responsible for collecting taxes, between the end of 2015 and the end of 2016, 2.8%
of taxpayers had moved to another state.
According to this information – and I can assure you that the IRS has the best data
in the United States – the migration rate, the internal mobility in the United States,
is very, and I mean very high compared to other developed countries.
Having said this, want to know which states have the greatest migratory deficit?
That is, the states with the greatest difference between Americans leaving and arriving per
year?
Well, check it out.
Yes, as you can see, New York is in the lead as the least attractive state for Americans
to stay in.
In net terms, only in 2016, and discounting arrivals, more than 150,000 Americans left.
It’s followed by other states such as Illinois, New Jersey, and California.
Wait, California?
Could anyone imagine that California, the land of technology, gorgeous beaches, and
good weather would be on the list?
Well, there it is.
And now the opposite question: What are the states with the greatest migratory surplus
of Americans?
Check it out.
Florida.
With a positive balance of about 200,000 Americans, has become the winner.
Mind you, this information is from 2016, but if instead of taking the data from the last
available year we looked at a longer period of time, for example since the beginning of
the 90s, the result is practically the same.
New York, California and Illinois lost the most Americans, while Florida, Arizona and
Texas won the most.
And... just a second, because this is much more important than meets the eye.
Do you remember the video we made recently about the hidden debt of states?
Well, folks, every time a state loses Americans, it loses a lot of wealth.
For example, the almost 200,000 Americans who moved to Florida, in net terms, in 2016
held an income of more than 17 billion dollars that year.
An income that, from now on, will be produced within Florida.
Part of this will be saved in the state’s financial entities, while another part will
be spent in its stores, supermarkets, cinemas, restaurants, and gas stations.
And another part will be invested in new businesses that will mainly be located in Florida.
All this means more wealth, more work, and also more tax revenues for this state.
See how important this is?
It doesn’t seem so trivial anymore...
Does it?
However.
Having seen all this, the question remains, what variables explain this movement of people?
Listen up.
(THE COMPETITION)
There are many reasons why people move from one place to another: family, work, climate,
opportunities, universities....
However if we take all the data into account there are a couple of factors that stand out.
And one of them is taxes.
In 2016, almost 600 thousand people moved from the 25 states with the highest taxes
to the 25 states with lowest taxes.
In fact, of the 25 states with the highest taxes, no less than 24 had a net emigration,
that is, they saw more Americans leaving than arriving.
Because folks, despite what’s sometimes said, internal migration isn’t motivated
by the weather or things like that.
While California does suffer from this deficit, a state like New Hampshire, which is small,
cold, mountainous, and has a narrow coastline has recorded a surplus since the year 2000.
And, listen up, because the neighbors of Joshua Bartlett's state, Rhode Island, Vermont, and
Massachusetts, all have much higher taxes, and lose Americans every year.
And yes, New Hampshire is the state with the second lowest taxes in the United States.
Coincidence?
Not at all.
The same happens in the Midwest.
While South Dakota generally registers a surplus of immigrants from year to year, its neighboring
states, Nebraska, Iowa and Minnesota, which have higher taxes, have had migration deficits
for 5 consecutive years.
And then there’s Kentucky versus Tennessee or California versus Nevada, Texas versus
Washington.
States with higher taxes lose and states with lower taxes win.
What’s more, a study done by economists from the Treasury Department, estimated that
when New Jersey raised its state income tax in 2004 by almost 2.5 points, it caused more
than 80 millionaires to change residences per year.
That might not seem like much, but the truth is that residents with higher rents pay proportionally
more taxes.
Now, just a second, because with taxes come regulations; for example, and perhaps, especially,
those that affect housing.
See, a combination of high property taxes and several regulations and limitations to
building make living in one particular state much more expensive than living in another.
This is what happens in California.
(” Californians fed up with housing costs and taxes are fleeing state in big numbers”.
CNBC)
Folks, renting an apartment in Las Vegas or Phoenix costs, on average less, than half
the cost of an apartment in Los Angeles or San Francisco.
When we saw Silicon Valley emerge recently, we noticed that there were no big buildings
in the area, remember?
Now you can understand why it’s so expensive.
Not much housing and a lot of demand led to incredibly high prices.
And, of course, this makes moving to another state worth it for many people, even if they’ll
earn less.
But, this has been the case so far.
And we can say that the effect that all of this has had has been very important:
States with a migration surplus have also been able to grow more, partly because they
have more attractive policies for companies, entrepreneurs and, as we’ve also seen, workers.
But... from now on... everything indicates that the effect will be even greater.
All thanks to Donald Trump and the Republican Party’s tax reform.
Listen up.
(MORE COMPETITION)
This may be one of the best things Donald Trump has done.
The fiscal reform of the end of 2017 not only meant improving taxation for companies, but
also boosting competition among the states.
Until now, the federal government subsidized part of a state’s taxes.
This is because they were deductible.
What you paid to the state was deducted from the taxes that you had to pay to the federal
government.
Something that worked as an incentive for states to raise taxes.
Well, the tax reform has limited this situation so that the number of households that can
deduct local and state taxes has dropped from 42 million homes in 2017 to about 17 million
in 2018.
All while having much smaller deduction amounts.
This has been the equivalent of an automatic tax increase in the states with higher taxes.
Because now their taxpayers will have to pay the state tax and practically the entire federal
tax in full.
For example, according to the calculations of the El Cato Foundation, a taxpayer from
the state of New York who in 2017 would have received a rate of 33% on federal income tax
and $ 30,000 on state and local taxes could have decreased federal taxes by $ 10,000.
That is, thanks to this deduction, state and local taxes would have cost $ 20,000
However, with the new tax reform, they’ll now have to pay $ 30,000 for state and local
taxes-- 33% more.
And that shows!
So now the differences between the states with the highest taxes and the states with
the lowest taxes will be much greater.
("Perhaps if the high-tax states didn’t have this federal crutch to prop up their
big spending, they might have to cut taxes to stay competitive”.
Ronald Reagan)
In fact, as the Wall Street Journal recently published, there’s a boom in Florida for
wealthy buyers who want to purchase real estate and establish their residence there.
Do you know why?
Could it have something to do with the fact that Florida doesn’t have a state income
tax and that its property taxes are also relatively low?
Anyway, folks, do you know what all this means?
No less than a new era of competition between the states of the USA.
From now on, state governments will feel a lot more pressure to manage their budgets
well.
The good news is that the evidence points to this being good for everyone.
Basically, this is the growing rivalry that the states are beginning to develop behind
the scenes--a rivalry to be the most desirable and affordable place for US citizens to live.
So I really hope you enjoyed this video, please hit like if you did, and don’t forget to
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Don’t forget to check out our friends at the Reconsider Media Podcast - they provided
the vocals in this episode that were not mine.
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And as always, I’ll see you in the next video.