State Income Migration and Border Tax Burdens

Abstract

Citizens are departing high tax US states for low tax rates. These effects are particularly strong among bordering states. Each positive 1 percentage point tax burden differential between states decreases the ratio of income migration into the high tax state by 6.78 percent in a given year. This paper highlights the states which are regionally competitive (Texas and Tennessee), regionally non-competitive (California, Florida, and New Jersey), and those states on the edge of being non-competitive on all borders (Illinois and New York).