For Low-Tax States, Four People Move In For Every One Person Who Leaves
The trend is reversed in high-tax states, where an average of 2.5 people leave for every one person who moves in
For states with the lowest taxes, an average of four people moved in from other parts of the country for every one person who left over the last eight years, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. The trend is reversed in high-tax states, where an average of 2.5 people left for every one person who moved in.
Nevada, Florida, South Carolina and Texas are prime examples of low-tax states that are attracting new residents. Nevada gained more residents than any other state over the last eight years—for every nine people who moved into Nevada from 2013 to 2020, just one person left—and it has the sixth-lowest tax rate in the country.
That’s according to a Redfin analysis of estimated migration to and from 48 U.S. states from 2013 to 2020, correlated with rates of sales tax, income tax and property tax in 2020. For the national average, the 15 states with the lowest taxes are considered “low-tax states” and the 15 states with the highest taxes are considered “high-tax states.” Hawaii and Alaska are excluded because they’re extreme outliers in terms of migration.
Florida has the seventh-lowest tax rate in the country and gained more residents than all but four other states from 2013 to 2020. For every seven people who moved into Florida, just one person left.
“A lot of people are moving into Jacksonville from places like California and the East Coast because they can work remotely. They figure it’s a pretty good deal to pay no state income tax and live at the beach,” said local Redfin agent Heather Kruayai. “Competition and prices are up and supply is down this year, partly due to those out-of-state buyers who sold homes in expensive markets and are buying homes using cash in Florida.”
South Carolina has the lowest tax rate in the U.S. It also has the 11th-highest in-migration rate (tied with Delaware), with five people moving in for every one person who left from 2013 to 2020. Texas, with the eighth-lowest tax rate in the country, also saw five people move in for every person who left.
“Three-quarters of my clients are moving to Austin from the Bay Area, and some are coming from other parts of California or New York,” said Austin Redfin agent Andrew Vallejo. “There are a lot of reasons to move to Texas, but for many homebuyers the fact that there’s no state income tax is one of the most attractive things. I have one client who moved his entire company from California to Texas because it has lower taxes. Low taxes are also motivating big companies like Tesla, Apple and Google to open offices in Austin, which brings in even more people.”
States with high taxes typically lose residents
On the other end of the spectrum, states with high taxes tend to lose residents. New York, which lost more residents than any other state from 2013 through 2020 (for every eight people who left, just one person moved in) has the sixth-highest tax rate in the U.S.
Illinois and New Jersey are both among the top four states in the country in terms of both taxes and the number of people moving away.
California also fits the pattern, albeit to a lesser extent. California has the highest tax rate in the country and while more people left the state over the last decade than moved in, it ranks number 15 in terms of out-migration, with about one person moving in for every three people who left.
One in five homebuyers cite lower taxes as a factor in moving to a different area
Twenty-one percent of homebuyers who are relocating cite lower taxes as one reason for their decision to move to a different area. The only factors more common than low taxes are proximity to family, desire to live somewhere more affordable and desire for a bigger house. That’s according to a recent survey of more than 600 Redfin.com users who have moved to a different metro in the last 12 months or plan to do so in the next 12 months.
“Tax rates are one factor for homebuyers deciding whether to move and which state they ultimately land in, but just how important they are is different for everyone,” said Redfin lead economist Taylor Marr. “When people have the flexibility to move to another part of the country, they consider factors like living close to family and friends, job opportunities, cultural amenities, and outdoor activities in addition to how much of their paycheck goes directly into their pockets.”
“Some people leave high-tax states and move to low-tax states because they’re seeking low taxes, but others make the move because relatively affordable housing, warm weather and business-friendly regulations are common in low-tax states,” Marr continued.
There are a few exceptions to the pattern: Arizona, Idaho and Colorado, for instance, have high taxes and high rates of people moving in from other states.
“Almost all my buyers are from out of state, with most coming from Chicago and Seattle, especially now that a lot of people can work remotely. They come to Phoenix because homes are relatively affordable here,” said local Redfin agent Heather Mahmood-Corley. “Income taxes don’t come up much in our conversations, but buyers do appreciate the low property taxes in Arizona. I recently helped a couple buy a single-family home with a casita that was three times the size of the two-bedroom condo they sold in downtown Chicago. Their annual property tax bill in Arizona is the same as their monthly bill was in Illinois.”
To view the full report, including charts and methodology, please visit: https://www.redfin.com/news/low-tax-states-migration/
About Redfin
Redfin (www.redfin.com) is a technology-powered real estate broker, instant home-buyer (iBuyer), lender, title insurer, and renovations company. We sell homes for more money and charge half the fee. We also run the country’s #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Since launching in 2006, we’ve saved customers nearly $1 billion in commissions. We serve more than 95 markets across the U.S. and Canada and employ over 4,100 people.
