Population Flees High Tax States

Barron's reports:

From 2000 through 2004, a net 1.3 million people moved out of states with taxes on ordinary income and into those without such taxes, says Richard Vedder, an economics professor at Ohio University. While climate clearly has played a role in the moves -- the destinations are often in the Sunbelt -- many of the low-tax states posting gains aren't generally considered dream spots: Nevada, New Hampshire, South Dakota, Tennessee and Wyoming.

"It's a stealth migration, and it's one of the biggest, most significant yet least recognized movements of the population in American history," says Vedder. "People are voting with their feet to say that taxes do matter."

With this year's tax-filing season just around the corner, tax-friendly states may soon get still more residents. Since the outlook for tax cuts on the federal level is bleak (see "Washington Long Shot") and since the disparities among states' taxes is huge, "the one place taxpayers can make a difference is by moving, radical as it may seem," says Patti Brennan, president of Key Financial, an advisory firm in West Chester, Pa.

Wealthy Americans, in particular, seem fed up with giving an ever-growing share of their riches to the state tax man. Many are upset at moves by New York, New Jersey and a number of other states to squeeze ever larger revenues from estate taxes.

These are mostly Blue states that people are leaving.This will cause more pressure to raise taxes because that's what they do in these high taxes states.It's always a bull market in spending in high tax states.