Budget & Tax
Trent England & Curtis Shelton | December 19, 2018
How money walks: Washington
Trent England & Curtis Shelton
is a project that tracks the migration of income between all 50 states. Using IRS data, How Money Walks shows how states have gained or lost wealth between 1992 and 2016. These data provide evidence about the effects of tax policy on where people choose to live.
Washington state is the outlier among the nine states with no income tax. Most of the others are “red states,” like Texas and Florida. Two—Nevada and New Hampshire—could be considered “purple.” But Washington is the lone liberal state in the bunch. This makes it a unique battleground for tax policy and an example of how the inability to tax income acts as a limit on government.
Washington state enjoyed $19 billion of annual adjusted gross income moving into the state from 1992 to 2016. It gained the most wealth from California, which has the highest income tax rate in the country. California has lost—on net—$58.63 billion in annual adjusted gross income from wealth migration—$7.32 billion to Washington alone.
Washington differs from the first two states we looked at, Texas, with lower rankings for competitiveness based on policy variables. According to the , which compares states’ tax structures, Washington ranked 20th. Washington is in the bottom half (37th) , which ranks each state on its economic competitiveness.
Even without an income tax, Washington has a higher tax burden than Oklahoma by about half a percentage point. The Evergreen State has higher
|Net Wealth Migration (1992-2016)||Gain of $18.78 billion||Loss of $1.22 billion|
|Income Tax Rate||0%||5%|
|State Business Tax Climate Index Ranking||20th||26th|
|Rich States, Poor States Ranking||37th||16th|
|State and Local Tax Per Capita||$4,261||$3,060|
|Tax Burden as a Percentage of Income||9.29%||8.73%|
Why does Washington state remain highly competitive even with a higher overall tax burden? Why is a state with weather that causes
Not all taxes are created equal. An income tax is, quite literally, a penalty on work. One of the silliest phrases in tax debates is “sin tax,” which is used to specify those taxes intended to reduce a certain behavior while implying that other taxes have no such effect. On the margin, there is no question that gas taxes reduce driving, sales taxes reduce sales, property taxes reduce real estate investment, and income taxes reduce income earning—or convince people to move elsewhere.
David and Ann Brown Distinguished Fellow
Trent England is the David and Ann Brown Distinguished Fellow at the Oklahoma Council of Public Affairs, where he previously served as executive vice president. He is also the founder and executive director of Save Our States, which educates Americans about the importance of the Electoral College. England is a producer of the feature-length documentary “Safeguard: An Electoral College Story.” He has appeared three times on Fox & Friends and is a frequent guest on media programs from coast to coast. He is the author of Why We Must Defend the Electoral College and a contributor to The Heritage Guide to the Constitution and One Nation Under Arrest: How Crazy Laws, Rogue Prosecutors, and Activist Judges Threaten Your Liberty. His writing has also appeared in the Wall Street Journal, USA Today, Washington Times, Hillsdale College's Imprimis speech digest, and other publications. Trent formerly hosted morning drive-time radio in Oklahoma City and has filled for various radio hosts including Ben Shapiro. A former legal policy analyst at The Heritage Foundation, he holds a law degree from The George Mason University School of Law and a bachelor of arts in government from Claremont McKenna College.
Policy Research Fellow
Curtis Shelton currently serves as a policy research fellow for OCPA with a focus on fiscal policy. Curtis graduated Oklahoma State University in 2016 with a Bachelors of Arts in Finance. Previously, he served as a summer intern at OCPA and spent time as a staff accountant for Sutherland Global Services.