In the realm of state taxation, the newly updated version of our State Tax Competitiveness Index (STCI) shines a light on how effectively states’ tax systems are structured and how their tax rates compare to those in other states. While the index doesn’t measure a state’s standard of living or economic growth potential directly, it raises an intriguing question: does tax competitiveness impact demographic and socioeconomic outcomes? Existing literature has linked competitive taxation to economic growth, and we are eager for researchers and policymakers to delve into this using our latest data.
Examining the correlation between tax competitiveness and interstate migration trends reveals some fascinating insights. By analyzing the backcast data from the 2025 Index alongside the most recent state-to-state migration flows from the American Community Survey (ACS), we unearth a compelling relationship between well-structured tax codes and inbound migration patterns.
To ensure the reliability of our analysis, we combine three years of ACS migration data (2021–2023) with our 2022–2024 STCI rankings. The top-ranking states on the Index witnessed an influx of residents in recent years, with Florida, Texas, and Tennessee leading the way in attracting new inhabitants. Conversely, states at the bottom of the rankings experienced significant population declines, with California, New York, and New Jersey being notable examples.
The middle-ranking states showed a consistent trend: the more tax-competitive a state, the more positive its net migration. States in the top half of the Index experienced population growth, while those in the bottom half faced losses, including the District of Columbia.
The impact of tax competitiveness on migration has become even more pronounced post-pandemic, with the majority of top-ranking states witnessing positive net migration while several lower-ranking states saw population declines.
While enhancing tax competitiveness doesn’t guarantee an immediate migration boost, recent data emphasizes the pivotal role tax policies play in shaping relocation decisions. A well-designed tax code is crucial for attracting individuals and businesses to a state, making it essential for policymakers to evaluate their state’s tax competitiveness using the Index and make necessary adjustments to enhance attractiveness and stability.
In conclusion, the data speaks volumes about the influence of tax competitiveness on migration patterns. State officials should heed these trends and strive to create tax structures that not only benefit residents but also enhance the state’s overall economic landscape. Subscribe to our updates to stay informed on tax policies shaping the future.
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