CUMBERLAND COUNTY, Tenn. -- A new look at data from the Internal Revenue Service shows that Americans are fleeing states with higher taxes for states with low tax rates.
Economists have spent decades researching the effects of income taxes, including the national federal income tax, which turned 100 years old on Feb. 3.
But a new review of federal taxpayer 1040 files from 1995-2010 provides a clear pattern of movement out of states with high tax burdens and into states with low tax burdens.
In How Money Walks, author Travis H. Brown shows how $2 trillion in adjusted gross income (AGI) moved between the states from 1995-2010.
In a recent interview with CBN News he explained the significance of the data.
"We're talking not about a survey, not a sample, not a focus group," he said. "We're talking about actual results of people's gross income."
Taxes: Less Is More
Brown discovered that the nine states with no personal income tax gained $146.2 billion in AGI. Those states include Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Conversely, the states with the highest personal income tax rates lost a total of $107.4 billion. They are California, Hawaii, Oregon, Iowa, New Jersey, Vermont, New York, and Maine. Washington, D.C., was also included.
Another measurement delivers similar results. Brown looked at the 10 states with the lowest per capita state and local tax burdens and found they netted $69.9 billion in AGI. Those states include Alaska, South Dakota, Tennessee, Louisiana, Wyoming, Texas, New Hampshire, Alabama, Nevada, and South Carolina.
The 10 states with the highest state and local tax burden lost $139 billion in AGI. They are New York, New Jersey, Connecticut, California, Wisconsin, Rhode Island, Minnesota, Massachusetts, Maine, and Pennsylvania.
Some of the so-called "winner" states like Texas and Florida are well-known for attracting newcomers. But others, like Tennessee, could be considered more of a well-kept secret. From 1995 to 2010, the Volunteer State took in $8.3 billion in AGI. It received the most from California, Michigan, and Illinois.
Sweetening the Deal
That's no surprise to many in Tennessee like Mary Jo Paige, director of marketing for Fairfield Glade, a retirement community in eastern Tennessee. Fairfield Glade perches atop the Cumberland Plateau and draws retirees from around the country.
"A lot of people are coming from the Midwest -- Wisconsin, Illinois, Michigan, Ohio," Paige said. "A lot of people are coming from the Northeast because that's a very expensive place to live."
With 11 lakes and 90 holes of golf, the physical beauty in Fairfield Glade makes it a natural sell -- and the lower taxes help to close the deal.
Karen and Dennis Shaw escaped a little more than 10 years ago from the D.C. suburbs of northern Virginia.
"When I left there I was paying $4,000 a year in taxes and when I moved down here my taxes went to $750," Dennis explained.
Chris and Abe Celik moved from a small house in the Chicago suburbs to a beautiful retirement home in Fairfield Glade. Here they can afford a few extras like a new pontoon boat.
"We still have a house in Chicago, a three-bedroom ranch," Abe said. "We pay over $9,000 in taxes. On this house on a lake we pay less than $1,400."
Better Weather or Lower Taxes?
James L. Martin is chairman of 60 Plus Association, a D.C.-based conservative seniors advocacy organization. He said he thinks taxes are the main reason that people move, even though it's not always publicly discussed.
"Those states they're moving to, sure, climate is a part of that," he said. "But that's not the real reason. It's the economic situation they find in those states."
Critics contend that tax cuts play at most, a minor role in migration. In a 2011 paper, "Higher State Taxes Bring More Revenue, Not More Migration," analysts at the Center on Budget and Policy Priorities argue that research shows that people move more for new jobs, cheaper housing, or a better climate than for taxes.
Of course, plenty of people on the ground at Fairfield Glade might disagree.
"That's probably even more important to people than what the cost of homes are because that's more their long-term living expenses is what the taxes are here," Misty Keyes, vice president of Fairfield Glade Homes Sales and Glade Realty, said.
Brown is careful not to attribute taxes as the sole reason for migration. In How Money Walks he writes, "I am not drawing a causation about migration and taxes, but there is an undeniable correlation here."
And so, he believes that policy makers should not ignore statistics that show dramatic shifts between high and low tax states.
"They're not the only thing [taxes]," he said. "But they do weigh in when it's time to make a lifetime decision."
At least six Republican governors may be thinking the same thing. Governors of Indiana, Kansas, Oklahoma, North Carolina, Wisconsin, and Ohio cut taxes this year. In the Buckeye State, lawmakers approved slashing income tax rates by 10 percent over the next three years.
Drawing Them In
In the meantime, Fairfield Glade residents like Tom and Cheryl Jones say anyone considering a move should look beyond surface scenery and evaluate just how a state's taxes could impact their personal finances.
"You just come to visit a place and you really don't realize that [taxes] until you really look into it and see what it has to offer," Tom Jones said.
"The first time we were up here on vacation we didn't have any idea it would be lower," he said. "But when the real estate agent gave us the packet of information and it had the tax rates and showed the states with income tax, sales tax, and everything and property tax, we started seeing all the benefits."
For families like the Shaws, lower taxes have brought peace of mind and a little extra to spare.
"We have here the home that we wanted, the land that we wanted, the amenities that we really wanted," Karen Shaw said.
For all families, there's no denying that taxes affect income. Exactly how they affect where they live is debatable.
But as the IRS data shows, any community that wants to attract people should consider lower taxes as a draw -- just like a beautiful golf course or mountain lake.