The Slow-Motion Suicide of New York and California by Dan Mitchell

Two of the worst states for tax policy are California and New York.

They have punitive income tax rates, high sales taxes, and myriad other ways of diverting money from the productive sector of the economy to finance bloated public sectors.

I’ve written several time that greedy politicians in these states are driving away taxpayers. Simply stated, successful people are “voting with their feet” and choosing to move to states with lower tax burdens.

Especially states with no income taxes.

But it’s not just people that are moving. As shown by these maps, money is also escaping from California and New York.

The above map comes from Linly Lin and Tom Maloney, who wrote a column for Bloomberg about money-management firms fleeing high-tax states.

Here are some excerpts from their report.

The drip, drip, drip of the finance industry’s exit from New York and California has been measured anecdotally… Elliott Management decamped to West Palm Beach. AllianceBernstein to Nashville. Charles Schwab moved to suburban Dallas. Now, for the first time, there are hard numbers quantifying the exact scope of the exodus. Both states have in the past three years lost firms that managed close to $1 trillion of assets…The exodus from the Northeast and West Coast has meant the loss of thousands of high-paying jobs, straining city and state finances by sapping tax revenue. …The moves, often born out of a desire for lower taxes, …spurring plenty of angst in the places left behind… From the start of 2020 through the end of March 2023, more than 370 investment companies — about 2.5% of the US total, and managing $2.7 trillion in assets — moved their headquarters to a new state. The vast majority of the migration was out of high-cost-of-living locales in the Northeast and on the West Coast and into Florida, Texas and other Sun Belt refuges.

Here’s another map from the column.

In this case, the authors look at how Texas and Florida are the main beneficiaries of America’s internal money migration.

By the way, I think taxes play a much bigger role than weather.

Nobody moves from California to Texas for the climate. Meanwhile, it’s possible that weather helps to explain the big shift from New York to Florida, but keep in mind that most people find Florida summers just as unpleasant as New York winters.

I’ll close by noting that red states have been outperforming blue states, and this Bloomberg data is another piece of powerful evidence to add to our collection.

P.S. My series on Texas vs California and Florida vs New York  also show the superiority of low taxes compared to higher taxes. Maybe, just maybe, there’s a lesson to be learned.