In just one year, over 9,000 Iowans moved to Florida, Texas, and South Dakota – all states that do not have an income tax.
Since 1980, the nation’s population has grown by more than 40 percent, and Iowa’s population has only grown 7 percent. Tax rates have a direct impact on the population. States with lower tax rates have more people moving to them from states with higher tax rates.
A Cato Institute study measured the impact of tax reform and population. In the Midwest, South Dakota “has enjoyed net in-migration in four of the past nine years,” while surrounding states, including Iowa, experienced net out-migration.
In just one year, over 9,000 Iowans moved to Florida, Texas, and South Dakota ¬– all states that do not have an income tax. When these people leave Iowa, their wealth goes with them. The website howmoneywalks.com uses IRS and US Census Bureau data to calculate how much wealth in the form of adjusted gross income (AGI) each state has gained or lost between 1992 and 2016. Iowa has lost $4.62 billion.
Between 1992 and 2016, Iowa lost $4.62 billion in wealth.
Three of the top five states Iowa has lost wealth to, Florida, Texas, and South Dakota, do not have an income tax. Arizona has a much lower rate. Only Minnesota has a higher rate.
Take a look at where Iowa has gained wealth: California, New Jersey, and New York have higher income tax rates, and Illinois and Pennsylvania are expensive big-government states.
What should our state do to stop hemorrhaging wealth? Iowa needs to speed up planned rate reductions, continue working toward a top individual income tax rate of 4 percent and cut the top corporate income tax rate to 5 percent.
Lower tax rates will make Iowa more competitive, create an atmosphere beneficial to entrepreneurs, allow taxpayers to keep more of their hard-earned income, and expand economic liberty.