Budget & Tax
Illinois exodus provides lessons for Oklahoma
December 23, 2021
The 2020 census revealed that Illinois experienced its first population decline since the state first participated in a census in 1810. Illinois’s population decline is not a surprise to anyone who has been watching population trends. Census data show that New York, California, and Illinois saw the largest population declines due to net migration in 2020. Conversely Florida, Texas, and Arizona saw the largest population increases due to net migration.
States with business-friendly climates, particularly states without a state income tax, have seen robust population growth. This population growth has come primarily at the expense of states with strict regulatory frameworks and high tax burdens.
Illinois is one of the prime examples of this trend. According to How Money Walks, Illinois lost more people to Florida and Texas than to any other state. Neither Florida nor Texas levies a state income tax.
What is most alarming for Illinois is the demographic profile of those who are leaving. Younger people in the prime working-age demographic have been leaving the state. This creates a multitude of problems. Entrepreneurs, as well as the talent pool for new-business hires, tend to come from a younger demographic. A lack of new economic activity stifles growth while also creating a long-term imbalance for certain areas of government spending.
The older a state’s population gets, the harder it is to pay for public pension programs. Simply put, you have fewer working-age adults paying for a larger share of retirees’ benefits. This puts a greater strain on the working-age population and further incentivizes them to look for better opportunities elsewhere.
What is happening in Illinois provides Oklahoma policymakers with an example of what not to do—and also provides an opportunity for Oklahoma.
While Oklahoma compares well to Illinois in terms of business-friendliness, the state directly to our south has consistently been one of the fastest-growing states in the country. Texas, with its absence of an income tax, makes the choice of moving to Oklahoma instead of Texas a difficult one. While recent reductions in Oklahoma’s income-tax rate should help move our state in the right direction, our policymakers should continue with rate reductions.
In addition, the shift to more flexible work schedules has spurred more state-to-state migration than ever before. As people continue to flee states like Illinois, California, and New York, Oklahoma should take full advantage of the situation by enticing more people to move here with further tax reform. Eleven other states have already made the first move in reducing their income tax burdens, making it even more important that Oklahoma not sit on the side and watch other states reap the benefits.