The states are often referred to as laboratories of democracy, and the more laboratories we have, the more likely we are to come across a Frankenstein over the long haul. It’s pretty clear that Dr. Frankenstein has been hard at work at this point, and we are starting, as a people, to deal with the monster he has created.
The idea behind federalism is that different states will operate differently, and different ways of life will emerge. We have gotten to the point, though, where those differences have become significant, and people are starting to make decisions on where they should live based not merely on climate, family, and jobs, but on the politics and economics of the states in question. Patterns are emerging, and politicians should pay attention to them.
California is the most obvious case. Over the last decade, the Golden State has lost a net of one million residents to domestic migration. The two most obvious reasons for the loss are high taxes and high housing prices, which reduce to the single problem of a very high cost of living. Today, the typical California home costs more than twice what the average U.S. home costs. The price of gas is 30 percent higher than the national average, and the state and local tax burden is 10 percent greater.
Regardless of the reasons behind this exodus, the ramifications are clear. California’s tax base is declining. This is even worse than it first appears, because the tax base isn’t declining uniformly. Households that contribute the most to state coffers are exiting in disproportionate numbers. Like other states with expansive social welfare programs, California relies on a highly progressive tax code to redistribute money from the rich to the poor.
This progressive tax code gives the rich a much greater incentive to leave California than the poor. Meanwhile, generous social programs give the poor a much greater incentive to come to or stay in California than they do the rich. Consequently, California is systematically losing the segment of the population that contributes the most to its tax base, while systematically gaining the segment of the population that requires the most.
This is a pattern that is playing out in many of the nation’s higher-tax states, and it should be very alarming to the people who still live in those states. The Tax Foundation ranks states according to their total tax burdens. The Census Bureau provides data on people’s migrations among the 50 states. Cross-referencing the two data sets reveals an interesting story.
In 2016, the last year for which data are available, the migration rate out of California, New York, and New Jersey (the three highest-tax states) into Wyoming, South Dakota, and Alaska (the three lowest tax states) was almost six times the migration rate in the other direction. And this is despite the fact that California’s weather is as superior to Alaska’s as New York’s cultural attractions are to Wyoming’s. Simply put, people are fleeing high-tax states in favor of low-tax states, and the reason is obvious.
The lesson for Pennsylvania should be clear. Over the last several years, Pennsylvania’s gasoline tax has almost doubled, and its turnpike tolls have more than doubled. The governor has either proposed or signed into law a “trooper tax” on people living in unpoliced municipalities, a 5 percent tax on medical marijuana, a 40 percent tax on vape shops, an 11 percent increase in the state income tax, a 6.5 percent severance tax, a 6 percent tax on cable television, movie tickets, and Netflix accounts, and additional taxes on cigarettes, lottery winnings, banks, and home insurance.
Everywhere Pennsylvanians look, they see their state government following California’s example. If Harrisburg keeps this up, they’ll soon see Pennsylvania taxpayers following California taxpayers’ example. They will leave, taking their tax dollars with them.
Antony Davies is associate professor of economics at Duquesne University. James R. Harrigan is CEO of FreedomTrust. They host the weekly podcast, Words & Numbers.