US Census Reports: John Galt Votes with his Feet

Taxpayers moving to low-tax states.

Back when the Democrats were showing their earnest desire to kill job creation by taxing the rich, we noted that rich people were leaving high-tax states for friendlier jurisdictions.  Governments have a long history of driving productive citizens away to their hurt as Hitler thoughtfully drove out the Jewish scientists who gave America the atomic bomb.

We've believed for a long time that the economies of low tax states will grow faster than high-tax economies, but the evidence until now was limited to really high tax places like New York state.  The New York Post reported:

New Yorkers are fleeing the state and city in alarming numbers -- and costing a fortune in lost tax dollars, a new study shows.  More than 1.5 million state residents left for other parts of the United States from 2000 to 2008, according to the report from the Empire Center for New York State Policy. It was the biggest out-of-state migration in the country.

The vast majority of the migrants, 1.1 million, were former residents of New York City -- meaning that one out of seven city taxpayers moved out... [emphasis added]

The Census Speaks

That study was limited to New York, but fortunately, our Constitution calls for a nationwide study of the entire population every ten years.  The results of the 2010 census have been crunched and we now have data on which states gained taxpayers and which lost.  The Wall Street Journal reports:

The Census is in. There are now 308.74 million Americans, an increase of 27 million, or 9.7%, since 2000. Americans are still multiplying, one of the best indicators that the country's prospects remain strong.

Although the Journal is correct that a growing population is a sign that people, particularly the 13 million immigrants, believe in the country's prospects, growth of less than 1% per year won't provide enough future taxpayers to pay off the Obama deficit.  The census reveals that most people are moving into conservative red states rather than into progressive, union-dominated states:

In order the 10 states with the greatest population gains were Nevada, Arizona, Utah, Idaho, Texas, North Carolina, Georgia, Florida, Colorado and South Carolina. Their average population gain was 21%. In the fast-growing states, the average income tax rate is 4% versus 6.9% in the slowest growing states.

The average population gain of the bottom 10 states was 2%. They include most of the states now famous for fiscal distress: Michigan, Ohio, New York, Illinois. Michigan was the one state that actually had a net loss of population in the past decade.

Particularly troubling is that three of America's traditionally high-octane states—California, New Jersey and New York—are in the population and economic doldrums. [emphasis added]

These three states are in trouble because productive citizens are leaving.  In the case of New York, Mayor Michael Bloomberg explained the problem:

One percent of the households that file in this city pay something like 50% of the taxes.  In the city, that's something like 40,000 people.  If a handful left, any raise would make it revenue neutral.  The question is what's fair.  If 1% are paying 50% of the taxes, you want to make it even more?

In Ayn Rand's novel Atlas Shrugged, the productive people led by John Galt went on strike and the entire national economy collapsed.  In real life, productive citizens are leaving states that steal an unfair amount of their earnings for other states which don't.

The Good News

The good news is that the blogosphere is spilling enough ink about why people move from one state to another that voters may be catching on.  It's possible that enough voters will understand the long-term effect of high taxes and unreasonable exactions by public-sector unions to force a change.

The Obama administration and surviving Democrats, in contrast, seem to be determined to keep spending as high as they possibly can.  No matter how many spending cuts or how much regulatory relief the Republicans pass through the House, the majority Senate Democrats can keep those bills from even coming to the floor for a vote.

It remains to be seen how many of the Senate Democrats who face the voters in 2012 will want the Republicans to label them "The party of 'No!'" when it comes to cutting back government.  If 2012 is anything like 2010, though, there's at least a chance of effectively devastating campaign ads.

The Bad News

History suggests that people who leave high-tax states for low-tax states don't always realize why they had to leave.  New Hampshire, which has no sales tax or income tax, is located between Maine, Vermont, and Massachusetts, three high tax states.

Under our federal system, there's nothing wrong with the politicians of a given state voting in any taxes they like, provided that people are free to leave.  In the past, low-tax New Hampshire made Massachusetts excesses possible - rather than agitate for change, a discontented voter moved over the border.  Moving conservatives off the Massachusetts voting rolls made it possible for Massachusetts to put in ever more expensive programs which drove more conservatives to New Hampshire, and so on.

At first, high taxes drove out productive, hard-core conservatives which was good for New Hampshire. Then semi-conservatives started moving out, too.  With the passage of time, even liberals found that taxes and house prices were higher than they could pay, but when they got to New Hampshire, they wondered where the municipal tennis courts were.

They forgot why they'd had to leave and started voting for higher taxes to pay for all the wonderful public services they'd left behind in Massachusetts. Over time, New Hampshire turned blue.

Before the recent election, New Hampshire had a Democratic governor, House, Senate, congressional delegation, and one Republican senator.  State spending went up by about 30% in three years.  New Hampshire legislators were firmly in the "We don't have a spending problem, we have a revenue problem" camp and tried to soak those selfish wealthy businessmen whom the feds were already plucking.  The Journal pointed out where that leads:

The Census numbers are one way to judge which public policies are working in the country and which aren't. Texas is looking like the new California. And California, Michigan, New Jersey and New York need to look deep into themselves to discover a more promising result 10 years from now.

A Ray of Hope

2010 reminded us why we have elections.  New Hampshire voters realized that tax-and-spend benefited no one but greedily corrupt public-sector union bosses and their pet pols.  Although the Democratic governor survived, the new Senate has 19 Republicans out of 24, there are more Republicans in the House, and the Congressional delegation has gone Republican.  The voters seem to have changed their minds about the virtues of spending.

On the other hand, about 35% of the New Hampshire state budget goes for welfare and 28% is spent on schools of one form of another.  As a practical matter, there are only two choices: a) reduce public sector pay including welfare payments or b) reduce public sector head count and cut welfare rolls.  Either course will be controversial; and, really, both are needed for long-term growth.

As we've pointed out before, changing government spending patterns is a long-term process.

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Economics.
Reader Comments

Nothing fails like success??! (chess notation for a questionable but brilliant move) The more we seem to succeed, the more likely we are to do stupid things like overspend.

The "I can afford that" or the new rich syndrome like Michael Obama has ("see my expensive stuff? I am richer than you are") only show the old saw - a fool and his money are soon parted...

January 10, 2011 1:42 PM

You are correct, a fool and his money are soon parted. In this case, it's us foolish voters who are parted from our money. We keep re-electing the same old bunch, they fool us, and spend our money on their friends. We're teh foolsw for letting them get away with it.

January 10, 2011 4:59 PM

WSJ has some specific facts about California:

Our greatest concern is that California is no longer the attractive place to live, work and start a business that it was when Mr. Brown was last governor. California's share of the nation's population steadily grew from 2.5% in 1910 to more than 12% in 1990. But the most recent data from the 2010 Census tells us that California's rapid growth came to an end 20 years ago. California lost more than one million residents to other states in each of the past two decades.


In recent years, revenues have collapsed because of the recession and California's high unemployment rate. But there is also a more fundamental cause. California is now paying the price for its dangerous reliance on high income tax rates on the state's top earners.

In 2007, the last of the "boom" years, a mere 7,000 households with adjusted gross income of more than $5 million paid nearly $11 billion in personal income taxes to the state, or one-fifth of all income tax collections. Two-thirds of all income tax revenue was collected from households with incomes over $200,000.

In 2008, after the recession began, there were only 4,700 households in the state with adjusted gross income over $5 million, and revenue from these households fell to less than $7 billion. This $4 billion drop in tax revenue from top earners accounts for fully half of the $8 billion drop in total personal income tax revenue from 2007 to 2008. The decline in tax receipts from those households earning more than $200,000 accounts for fully 93% of the decline in total tax revenues from 2007-08.

Worse, the estimate for state expenditures does not take into account the looming threats to the budget from the deficit in the state's unemployment-insurance fund and outstanding borrowing from local governments and special funds, which together amount to more than $25 billion. More ominously, Stanford University's Center for Economic Policy Research has estimated that the shortfall in the state's pension fund may be as much as $500 billion.

January 10, 2011 6:56 PM

You are correct, a fool and his money are soon parted. In this case, it's us foolish voters who are parted from our money.

October 17, 2011 9:43 AM

Yes, taxes have driven many productive citizens out of high tax states. There is also the underlying problem of regulations. If a company wanted to build a factory why would it choose a highly regulated state with permits as long as the eye can see, much less if it is not a right to work state? The regulations are in actuality another hidden tax as the union public sector employees that implement these regulations are paid with tax payer dollars. Our system is so skewed to the few that it is on the brink of imploding. The question is will the voter, the swing voter, take the time to get educated on the issues and vote for sound fiscal policy? I doubt it very seriously as these types prefer Dancing with the Stars to education.

November 16, 2011 11:22 AM

That was the genius of the Federal system - different states could try different things. What do we do when the Federal government does that?

January 19, 2012 10:36 AM

You are correct, a fool and his money are soon parted. In this case, it's us foolish voters who are parted from our money.

November 20, 2012 5:55 AM

You are correct, a fool and his money are soon parted. In this case, it's us foolish voters who are parted from our money.

November 20, 2012 6:00 AM

The 1940 also has a supplemental schedule for two names on each page. The supplemental schedule asks the place of birth of the person's father and mother; the person's usual occupation, not just what they were doing the week of March 24-30, 1940

November 20, 2012 6:16 AM
Add Your Comment...
4000 characters remaining
Loading question...