High Tax States Are Losing Middle Class Residents

High Tax states are the places with the most income inequality as middle class residents flee to conservative refuges.

In his Washington Times column, “The redistribution racket,” Steven Moore shares an interesting chart:

net domestic migration

[See also, “Good News: Northeast United States Losing Congress.”]

The bottom line is that the high tax states are losing people.

Massachusetts Sen. Elizabeth Warren appeared on one of the late night talk shows last week, beating the class warfare drum and arguing for billions of dollars in new social programs paid for with higher taxes on millionaires and billionaires. In recent years, though, blue states such as California, Illinois, Delaware, Connecticut, Hawaii, Maryland and Minnesota adopted this very strategy, and they raised taxes on their wealthy residents. How did it work out? Almost all of these states lag behind the national average in growth of jobs and incomes.

So, if income redistribution policies are the solution to shrinking the gap between rich and poor, why do they fail so miserably in the states?

The blue states that try to lift up the poor with high taxes, high welfare benefits, high minimum wages and other Robin Hood policies tend to be the places where the rich end up the richest and the poor the poorest.

California is the prototypical example. It has the highest tax rates of any state. It has very generous welfare benefits. Many of its cities have a high minimum wage. But day after day, the middle class keeps leaving. The wealthy areas such as San Francisco and the Silicon Valley boom. Yet the state has nearly the highest poverty rate in the nation. The Golden State, alas, has become the inequality state.

In a new report called “Rich States, Poor States” that I write each year for the American Legislative Exchange Council with Arthur Laffer and Jonathan Williams, we find that five of the highest-tax blue states in the nation — California, New York, New Jersey, Connecticut and Illinois — lost some 4 million more U.S. residents than entered these states over the last decade (see chart). Meanwhile, the big low-tax red states — Texas, Florida, North Carolina, Arizona and Georgia — gained about this many new residents.

This could mean a major conservative future is ahead of us because, as these Liberal states lose people, they will also lose Representatives and Electoral College numbers.

The downside however is that red states might gain middle class refugees from blue states who are not culturally conservative.

So we have reason to both hope and fear for the future!