Decades of fiscal mismanagement at federal, state and local levels have created a debt nightmare that can only be solved by massive inflation, tax increases, structural reform or bankruptcy. Politicians have been reluctant to enact the structural reforms necessary to correct this trajectory, and instead, have “kicked the can” to future generations. People have woke up to this fact, and this can be seen in the states people are moving to and conversely where they are leaving.
As WSJ notes, Florida and other tax-friendly, pro-growth states have benefited greatly:
The eight fastest-growing states by population last year were located in the West or South (Nevada, Idaho, Utah, Arizona, Florida, Washington, Colorado and Texas). And what do you know? These states have also experienced rapid employment and GDP growth spurred by low tax rates and policies generally friendly to business and job creation. Nevada, Arizona, Texas, Washington, Utah, Florida and Colorado ranked among the eight states with the fastest job growth this past year, according to the Bureau of Labor Statistics. Nevada, Texas, Washington and Florida have no income tax.Source: WSJ
On the other hand, people have been fleeing high tax states like Illinois, and it’s not due to cold weather:
Illinois’s population has declined by 157,000 over the past five years, which is equivalent to the mid-sized city of Rockford. According to research outfit Wirepoints, more than 114,000 residents left the state on net in 2018 and nearly 1.5 million people since 2000. Cold weather? While Illinois’s population has declined by 0.8% since 2010, Indiana’s has grown 3.1% and Wisconsin’s by 2.2%.Source:WSJ
I can relate to this personally when we were faced with the prospect of relocating from Michigan last year. Driven by a desire to be closer to family and my wife’s job, the choice was between relocating to Illinois, either in Chicago and its neighboring suburbs or to Indiana. Living in Chicago proper would have provided a shorter commute for my wife and quick access to all of the amenities of the city, such as sporting events, restaurants, and museums. Chicago’s fiscal woes are well documented, however. The deciding factor was skyrocketing real estate taxes in Chicago and Illinois, with taxes roughly 3 to 3.5x that of a similar house in Indiana! Given the schools in the town we ended up choosing were excellent, and Chicago was a mere 30 minutes away, the decision was easy.
Therefore, when considering where to live it is paramount to understand the state and local fiscal situation as it could have a dramatic impact on your ability to keep the money you earn and ultimately, your long term freedom. This trend will only become more acute in the future.