The surprising reason behind the California, Illinois, New York exodus to low-tax states

For those of us living in cities that are increasingly insecure and unclean, there is significant skepticism around what exactly we are getting in return for our hard-earned tax dollars

Amidst a pandemic and the sharpest recession ever recorded, more Americans are heading for low-tax states. Even before 2020, demographics were already becoming tilted towards places such as Florida and Texas.

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Today, that pattern is only accelerating as more jobs become remote, and people simply run out of money and the appetite to spend all of their take-home pay on opulent state and local governments.

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The trends are clear for anyone looking.

If you walk around Manhattan, where I live, one of the most common sights you see these days are moving trucks. As a city of renters, we have the flexibility to leave at any time, and countless people are exercising that option.

From a consumer's point of view, it’s simply become financially unsustainable to stay in these places no matter how much we love and enjoy them.

Millions are considering what many of their family and friends have already done in recent decades: The move to a warmer, lower-tax place where their money takes them further, and their state government doesn't take a devastating bite out of their paycheck.

I don't need to tell you about the merits of the dramatically better climate down south, so let's talk about taxation.

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Public policy in states such as New York, New Jersey and Connecticut have been crushing middle-class people for quite some time.

For instance, if you consider the cost of property taxes in places with decent schools and infrastructure, you'll quickly understand why a six-figure income is not enough to be comfortable in this neck of the woods. Citizens of California and Illinois find themselves in similar situations, which is why outflow out of those states is staggering.

Here in the Big Apple, we face three different types of income taxation.  If you look at your pay stub, local, state and federal government tax combined can sometimes add up to numbers that are hard to wrap your brain around.

NYC FACES DEEPENING TAX REVENUE HOLES

Taxation will be on the rise in a post-corona world. In Governor Cuomo's own words, this state of New York is “basically bankrupt.”

Naturally, other high tax states will find themselves in similar predicaments as relief money runs out. That is why no one will be surprised when these states enact significant tax hikes after COVID-19 subsides.

Especially for those of us living in cities that are increasingly insecure and not clean, there is significant skepticism around what exactly we are getting in return for our hard-earned tax dollars. The bottom line is that it's costly to live and do business in high tax states.

NYC FACES DEEPENING TAX REVENUE HOLES

Admittedly, the eye-popping cost of living isn’t entirely these state governments’ fault, but their tax-and-spend and heavy-handed regulatory policies certainly don't make these problems any better.

We arrive at the heart of this debate: simple economics and financial limitations fuel the exodus, not politics.

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Regardless of partisan affiliation, millions of people are migrating out of necessity. Whether they are Republicans or Democrats, many leave because they don’t have a choice.

From a consumer's point of view, it’s simply become financially unsustainable to stay in these places no matter how much we love and enjoy them.

The numbers don't lie. Just a few generations ago, the cost of living across the country was remarkably similar.

Today, there are yawning gaps between cities like New York and Dallas (that city has 56% lower cost of living than Manhattan). Whether you’re just starting your career or close to retirement, you’ll probably have a better financial future if you find a sustainable living in a zero-tax state such as Florida or Texas.

As the years go by, there’s little doubt that these trends will continue to accelerate as more people leave. High-tax states will then have to raise taxes, even more, to make up for their fiscal woes created by the wake of their newly departed taxpayers. A sustained mass exodus will create a dangerous feedback loop where further tax hikes will spur even more migration.

I believe the ongoing exodus will continue to color our politics, culture, and national economic destiny as it shows no signs of stopping. We can only hope that high tax states wake up and realize that it is time to prioritize their citizens’ financial health and incentivize them to stay put.

David Grasso is the Executive Director of GenBiz, a non-profit dedicated to helping young Americans achieve financial freedom through entrepreneurship. David is also the host of "Bold Business" on Bold TV, an online television show that spotlights entrepreneurs and their entrepreneurial journey. 

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