If Washington tears a hole in your wallet when your tax bill comes due Monday, there’s not a lot you can do about it before next year.
But you can change your state tax rate, if you so desire — by voting with your feet.
Millions have done just that. As I wrote last Sunday, between 1995 and 2010, some $2 trillion worth of income followed Americans from one state to another. That movement, compiled by the IRS and analyzed by Travis H. Brown in his recent book, “How Money Walks,” corresponds fairly well to states’ individual income-tax rates.
By 2010, the nine states with zero individual income taxes were seeing a collective shift in their direction of $146.2 billion.
The nine states with the highest personal income-tax rates, on the other hand, were losing a collective $107.4 billion.
Put another way, only 20 percent of Americans lived in a zero-income-tax state in 2010, but those states reaped almost 60 percent of the net gains from income movement. The high-tax states had a quarter of the population, but half the net losses.
Georgia has fared well. By 2010, our state was netting $12.4 billion in relocated income. But there are some worrying signs.
Income is moving from metro Atlanta’s urban and suburban core counties to its exurbs. That’s an anomaly compared to most of the nation’s other growing metro areas, so I asked Brown if he knew of any comparable situations.
“What has happened in Los Angeles is similar,” he said. “People who are loyal Californians, who went to Los Angeles from Chicago or New York, they get there and then they realize there is a high tax burden in Los Angeles County. So, initially they first move … maybe two or three counties away.”
This move might be to the exurbs east of L.A., bedroom communities that offer amenities like better schools. Similar, in some ways, to the movement we see within metro Atlanta.
“Over time — and we’re looking at 15 years, so you can see the pattern emerge — if you look at those outer rim counties (in Southern California), they tend to make moves out of state next,” he said.
“Some of those people are saying, I left Los Angeles, I live 100 miles out, I don’t miss it as much as I thought I might, so I might as well just move to Phoenix or Las Vegas.”
Looking at county-level income data in metro Atlanta, a similar pattern is starting to emerge.
One example: From 1995 to 2010, Fulton County lost $173 million of income to Cobb; Cobb lost $80 million to Carroll, and Carroll lost $12 million to Randolph and Cleburne counties in Alabama.
That’s a relative trickle, but there are other pathways leading out of state. Georgia lost a cumulative $159 million just to the Alabama counties along our border.
In fact, Georgia lost income to each of our neighboring states. It’s the Los Angeles pattern Brown described, writ large: We gained income from states in the Northeast and Rust Belt that tend to have higher taxes, and we lost income to states that tend to have lower taxes.
As is true more broadly, tax rates alone don’t determine economic growth. Other factors matter, too. But it is in this context that, before Tax Day 2014, you can expect to hear Georgia’s legislators talk about lowering income-tax rates to ensure that trickle of money moving out of state doesn’t become a flood.
