New York, California Experience Over $200 Billion in Income Exodus Amid Tax Policy Debate

Economist Gary Winslett has highlighted a significant trend of capital and residents departing "blue states," asserting that their tax policies negatively impact economic growth. "A lot of blue states on this list. There's more to a state than just tax policy obviously, but on the margin, this does not help attract capital and people. And you need those for sustained economic growth and prosperity," Winslett stated in a recent social media post. This perspective underscores an ongoing debate about state-level economic competitiveness and the influence of fiscal policies on migration patterns.

Winslett, an Assistant Professor at Middlebury, has frequently argued that states with more business-friendly environments, often in the South, attract manufacturing and investment. He points to factors such as "right-to-work laws, cheap energy, affordable housing, low-cost land, fast permitting, low taxes, immigration" as a powerful combination for economic success. These policies, he suggests, create operational flexibility and attract capital that high-tax states struggle to retain.

Recent analyses corroborate a clear link between tax policies and migration. Data from Clarify Capital and the U.S. Census Bureau indicate that New York, California, and New Jersey experienced the largest declines in net migration, with drops of 45%, 42%, and 35% respectively. Conversely, states with favorable individual income tax policies, such as Florida, Texas, Tennessee, and Nevada, saw significant net increases in migration, ranging from 12% to 51%.

This population shift is accompanied by a substantial exodus of wealth and businesses. New York lost an estimated $111 billion in personal income, and California saw a departure of $102 billion due to residents moving out, according to a CBS Austin report referencing IRS data. Meanwhile, Florida gained approximately $200 billion from inbound migration. High-profile companies, including Tesla and Chevron, have relocated headquarters from California to states like Texas, often citing lower taxes and less regulation as key motivators.

While tax and regulatory environments are significant drivers, other factors also play a role in relocation decisions. A report by the Public Policy Institute of California (PPIC) notes that California, despite its high taxes, still boasts a highly educated workforce, innovation, and quality-of-life amenities that can attract and retain businesses. The PPIC also found that while headquarter exits from California have trended upwards, they represent a small fraction of overall headquarter activity, with far more new headquarters launching in the state.

The ongoing migration of residents and capital from high-tax "blue states" to lower-tax jurisdictions highlights a critical challenge for state policymakers. As Gary Winslett observed, "And you need those for sustained economic growth and prosperity." The debate continues on how states can balance revenue needs with the imperative to foster an attractive environment for both individuals and businesses.