Thursday, September 17, 2020

High Tax States Lose Representation in Congress: 2017 Tax Law and Pandemic Reinforce Population Trends

Peter Rex, Founder and CEO of Rex Teams recently announced that, "I'm moving my business headquarters off the West Coast." We tried San Francisco and Seattle. "Both were wonderful in their own ways, especially in natural beauty and personal friendships. But both have become hostile to the principles and policies that enable people to live abundantly in the broadest sense."
Rex joins a parade of individuals and businesses that are relocating from high tax states to low tax states due to 1) 2017 Tax Law that eliminated the deductibility of state and local taxes, 2) Post Covid-19, companies allowing employees to work from locations of their choice, and 3) Individuals and businesses avoidance of large urban centers with higher crime rates and economic lockdowns.  
The accompanying table lists the 10 states experiencing the greatest population gains, and the 10 states suffering the largest population losses.
The global pandemic has further enhanced the economic prospects of the gaining states, which experienced an average increase in insured unemployment rates between mid-March, and the end of August of 7.4% compared to a much higher average of 9.9% for the ten losing states.  
Many of the unemployed in high tax states will seek the more job friendly employment prospects in low tax states. Furthermore, the data show that the population gainers' average state and local tax rate was 7.82%, and the population losers' average state and local tax burdens was 9.5`%.  
Importantly, 7 of the 10 gaining states voted Republican in the last presidential election, and 7 of 10 losing states voted Democrat in the same election. In addition to invigorating the economies of low tax states, this migration will have the bonus impact of increasing the representation in Congress of destinations with lower state and local tax rates.
The table below reflects reapportionment post-2020 Census:

  • The 10 states with the highest population gains collectively will add 7 congressional representatives.
  • The 10 states with the largest population losses will lose 5 congressional representatives.

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