Budget & Tax , Good Government

Curtis Shelton | March 5, 2019

Income migration: Increase economic freedom, reduce high tax barriers

Curtis Shelton

The more something costs, the less demand there is for it. This is a basic rule of economics.

In that same vein, the more you tax something, the less likely people are to do that thing. This is the idea behind raising cigarette taxes. Raise the price of cigarettes through higher tax rates, and fewer people will buy cigarettes. However, not everyone accepts this logic when it comes to all taxes, specifically the income tax.

While people may not stop working, they can respond to high income tax rates in another way. They have the option to move to another state where they will pay less in income taxes. Many Americans have made that decision already. The data behind this tax migration has been collected by How Money Walks. We have already looked at several of the no-income-tax states and have shown just how much these states have gained in wealth over the last two decades.

On the other end of the spectrum is New York, with a top marginal tax rate of 12.70 percent. According to How Money Walks, New York lost $100 billion in adjusted gross income over two decades. This dramatic migration has caught the attention of New York Gov. Andrew Cuomo. While Gov. Cuomo recognizes that New York is at a competitive disadvantage, his solution doesn’t reach the heart of the problem. Gov. Cuomo is more focused on subsidizing high-income earners than on reforming the Empire State’s tax code to make it more competitive.

Just as corporate welfare limits a state’s economic freedom, so too does subsidizing one group of people at the expense of others. If New York or any other state wants to increase its competitiveness and grow its economy, the focus should be on increasing economic freedom and reducing high tax barriers.

Curtis Shelton Policy Research Fellow

Curtis Shelton

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.

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