The 2019 U-Haul state migration index is out, and the top states Americans are moving to are no surprise—Florida, Texas, North Carolina, South Carolina and Washington. These are states with light state and local tax burdens. Conversely, four of the top five states people are fleeing—Illinois, California, Michigan, Massachusetts and Pennsylvania—feature high taxes (though Michigan’s tax burden falls close to the national average).
In 2018, Texas was No. 1 and Florida was No. 2.
U-Haul publishes its index annually by calculating the flow of one-way truck traffic between its 22,000-plus locations (excluding Hawaii, for practical reasons) as people move to greener pastures.
For U-Haul, the implications of people heading more in one direction than another means that most of its fleet would end up in Florida and Texas in a few years. To avoid spending employee time and money to drive empty trucks back to states losing residents to out-migration, U-Haul discounts trucks heading to states losing residents. Thus, renting a tiny 10-foot truck, suitable for a person renting an apartment, from Fresno, California to Austin, Texas would set the mover back $1,957, while heading from Texas to California would only cost $626—one-third as much.
Of course U-Haul only captures a portion of the moving population—those willing to do-it-yourself—but its annual data usually lines up nicely with federal surveys and other reports. For instance, U-Haul’s top five in 2019 are projected by the U.S. Census Bureau to be in line to gain six U.S. House seats as the result of the 2020 census and the congressional apportionment that will follow. U-Haul’s bottom five states are estimated to be on track to lose four U.S. House seats.
Moving isn’t usually a vacation—a lot of work can go into it and it can be expensive. And, while high taxes may not be the proximate cause of many people’s decision to move, moving for a good career opportunity often is. People follow jobs. And job creators, small businesses and large corporations, do pay close attention to the bottom line, and often their investment decisions are influenced by their expected tax burden.
The concern for the state and local tax load was heightened, especially for sole proprietorships, after passage of the Tax Cut and Jobs Act of 2017. The big tax cut and tax code reform bill signed into law by President Trump in December of that year limited the deduction for state and local taxes (SALT) to $10,000 per household. Since then, job growth in the 27 states with average SALT deductions of less than $10,000 in 2016 for taxpayers who itemized has been running at almost twice the rate as in the high tax states with average SALT deductions in excess of $10,000.
In fact, of U-Haul’s top 10 performing states, Florida, Texas, North Carolina, South Carolina, Washington, Alabama, Ohio, Utah, Indiana, and Vermont, only two, Ohio and Vermont featured average SALT deductions greater than $10,000 in 2016. And in both cases, they likely benefited from migration from higher taxed neighboring states, Pennsylvania, in Ohio’s case, and New York, in Vermont’s case.
Of U-Haul’s 10 biggest losing states in 2019, Illinois, California, Michigan, Massachusetts, Pennsylvania, Maryland, New Jersey, New York, Colorado, and Wisconsin, only in Colorado did the average taxpayer who itemized deductions claim less than $10,000 in state and local taxes.
The pattern is fairly clear to see: low taxes attract jobs and people.