Between 1992 and 2014, the IRS tracked the migration of people and their AGI on their tax forms. The net results of these migrations are indicated in this map where red is a loss of income due to net migration and green is an income gain.
It is interesting to note that of the 8 least free states by the 2016 report of Cato Institute on Freedom in the 50 States of my last post, the following 7 states are either red or light red in this income migration map, indicating a loss of income:
New York
California
New Jersey
Maryland
Connecticut
Illinois
Rhode Island
Out migration from California tends to be strong to Arizona, Nevada, Washington, and Oregon. All of these states are more free than California and the least free is Oregon, which perhaps explains why its income increased the least of these four states.
New Hampshire, the freest state, had a small increase in income due to migration. Oklahoma and Alaska were #3 and #2, respectively, and both have risen in recent years in freedom, so their newly deserved reputations were not yet established in many of the years 1992 - 2014. Indiana at #4 has been more stable in its freedom and clearly has performed much better in minimizing losses than its neighboring states of Illinois, Michigan, and Ohio in this time period. Indiana's weakest ranking of #26 was in fiscal policy which includes taxes and that is a particularly strong factor on the out-migration of income. Tennessee, Idaho, Florida, and Arizona of the 10 most free states are also all green in this income migration map above. #5 South Dakota is white, or income neutral, and #9 Iowa is pink.
Overall, the freer states were the Rocky Mountain states, the Great Plain states from Oklahoma north, and the Southeast with the exception of Mississippi, Louisiana, and Arkansas. There are no red states in these areas. Nebraska, Iowa, Missouri, and Kansas are pink, but three of these states are in the #16 - #25 grouping for freedom. Missouri is further hurt by not being a Right to Work state.
Here is another interesting map from Peter J. Nelson of the Center of the American Experiment entitled Minnesotans on the Move to Lower Tax States 2016:
In the map, the bluer the color the greater the loss of taxpayers earning more than $200K a year. We also find that most of the low freedom states have higher losses than do high freedom states. All of the 9 states with gains equal or greater than 1.00% are in the top twenty most free states by the Cato Institute ranking. Tax policy is under the Fiscal Policy ranking and in this area South Carolina is ranked #23, Nevada is #25, and Wyoming is #21, so there is a stronger correlation with the overall freedom ranking than there is with the Fiscal Policy ranking subset of freedoms for these high income in-migration states. Some of these high in-flux states do have very high Fiscal Policy rankings, however, with New Hampshire, Tennessee, Florida, Montana, and Idaho having Fiscal Policy rankings from #1 to #8. So general freedom may be more important for a subset of the wealthier migrators and tax policy alone may be the most important factor for another subset of these wealthier migrators.
Overall, I would judge it likely that income migration is affected strongly by tax policy, but it is also affected strongly by a desire for freedom in general. Different people have different weightings on these aspects of freedom in their personal set of values. Good government seeks to provide everyone with the freedoms their individual rights entitle them to. When a state government offers a better service to freedom, rational and productive people will come to that state. Good things happen to states and the local communities when more rational and productive people choose to live there.
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