Could the Last Person Leaving California Please Turn Off the Lights?

Arthur B. Laffer, chairman of Laffer Associates, and Stephen Moore, a senior fellow at the Heritage Foundation, recently published an article in the Wall Street Journal entitled “So Long, California. Sayonara, New York”.

In the article, these gentlemen predict that “In the years to come, millions of people, thousands of businesses, and tens of billions of dollars in net income will flee high-tax blue states for low-tax red states.”

By the way, ‘Blue States’ are named as such because they tend to vote Democrat, while ‘Red States’ tend to vote Republican. Blue States include places like California, New York, New Jersey, and Minnesota. Red States include Arizona, Nevada, Texas, Florida, and Utah.

It’s popular in some political circles to blame President Trump’s tax plan for this exodus. That’s because the deduction for state and local taxes is eliminated. Which is bad news for high-income earners in high-tax places like Manhattan or Silicon Valley.

But the truth is that the migration to more affordable places to live – and invest – has been occurring since 2007. For example, Texas and Florida (two of the nine states with no tax on earned income) have collectively gained more than 2.3 million residents while California and New York have lost about 2.2 million people during the same time period.

It’s not just people that have migrated; the money they make and the jobs they create have also gone with them. The WSJ article estimates that California and New York have lost $23 billion in income and purchasing power, while Texas and Florida have gained a net $50 billion.

Of course, government bureaucrats in the high-tax-and-spend states like to put the blame for these lost jobs and revenue on anybody except themselves. But it’s interesting to note that while the net change in migration from California and New York to Texas and Florida was about the same, the amount of income and purchasing power created more than doubled.

It’s hard to guess what will happen next.

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