Data: EXography

IRS data show Florida, Texas, South Carolina are strongest tax base magnets; New York, Illinois, New Jersey least

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Voting with their feet

When people move from one state to another, they take their taxable income with them, and some states are gaining while others hemorrhage. This chart shows the net income of in- and out- migrants as a percentage of all residents' income.
Source: Internal Revenue Service Taxes,Florida,Illinois,New Jersey,New York,South Carolina,Texas,IRS,EXography

Three broad categories among the 50 states illustrate geographic changes affecting the most fundamental component of the U.S. economy, according to the latest Internal Revenue Service data on tax migration.

Derived from individual income tax returns from 2010 and 2011, the agency’s Statistics of Income Division shows where we live, where we moved and how much we make.

There are magnet states, which are those that siphon up to billions of dollars in taxable revenues from other states or grow their personal income tax base at significant percentages.

There are the static states, or those without dramatic changes in net inflow or outflow of taxpayers. Finally, there are the repulsion states, which are those losing taxpayers at alarming rates.

The most powerful magnet among the magnets is Florida, where the Sunshine State appears to exert the gravitational pull of the sun itself in attracting other taxpayers.

Florida gained nearly $5 billion in taxable incomes between 2010 and 2011. In percentage terms, that amounts to an increase of 1.43 percent when compared to the existing personal income tax base among people who resided there during the period the IRS analyzed.

Posting the next highest gain in dollar terms is Texas, which expanded its tax base by $2.4 billion.

South Carolina may be a small magnet, but it is a powerful one in proportion to its size. The state's tax base grew $835 million.

While below Florida and Texas monetarily, the only two states with billion dollar-plus increases, South Carolina’s expansion is 1.08 percent, which is the second-highest percentage gain in the nation.

In dollar terms, the South Carolina tax base expansion is one-third that of Texas, but the Palmetto State's tax base is only 17 percent compared to the Lone Star state.

Joining Florida and Texas as a top magnet state in dollar terms is North Carolina at $877 million. In percentage terms, the top states are Florida, South Carolina and Arizona, where the latter state had a 0.61 percent and $660 million taxable revenue increase.

There are few moving vans coming in and out of Kentucky. The state experienced a slight decline of $2.3 million in taxable income, which is a lot of zeroes before that registers as a statistically insignificant negative percentage.

Rounding out the top static states is Vermont, which lost $2.4 million in incomes or a 0.02 percent loss in the small state. Oklahoma saw a relatively minor influx of $17 million in incomes for a 0.03 percent gain.

The repulsion states are led by New York. The Empire State is the polar opposite of Florida, pushing taxable incomes to other states.

New York lost $3.3 billion in taxable incomes, most of it to Florida. Rounding out the top three states that lost the most incomes in both percentage and dollar terms are Illinois and New Jersey, where the former lost $2 billion in incomes and the latter $1.7 billion.

California, Ohio and Michigan each lost more than $1 billion in taxable incomes.

These migration patterns have consequences for government budgets written in town halls, courthouses and state capitols.

For example, while public officials in a southwest Florida county are concerned about traffic lights being timed correctly to reduce congestion, a top issue for the new mayor of Detroit is how to repair broken streetlights.

The labels “magnet, static or repulsion” provide context to these economic trends, and the underlying data the IRS provides is clear. It tells us a great deal about where we are going as a nation.

Jim Pettit is a public policy consultant who has analyzed state and county-level tax migration patterns nationally and in Maryland.
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