The trend is reversed in high-tax states, where an average of 2.5 people leave for every one person who moves in. One in five homebuyers cite lower taxes as one reason for their decision to move to a different area.
For states with the lowest taxes, an average of four people moved in from other parts of the country for every one person who left over the last eight years. The trend is reversed in high-tax states, where an average of 2.5 people left for every one person who moved in.
Nevada, Florida, South Carolina and Texas are prime examples of low-tax states that are attracting new residents. Nevada gained more residents than any other state over the last eight years—for every nine people who moved into Nevada from 2013 to 2020, just one person left—and it has the sixth-lowest tax rate in the country.
That’s according to a Redfin analysis of estimated migration to and from 48 U.S. states from 2013 to 2020, correlated with rates of sales tax, income tax and property tax in 2020. For the national average, the 15 states with the lowest taxes are considered “low-tax states” and the 15 states with the highest taxes are considered “high-tax states.” Hawaii and Alaska are excluded because they’re extreme outliers in terms of migration.
Florida has the seventh-lowest tax rate in the country and gained more residents than all but four other states from 2013 to 2020. For every seven people who moved into the Sunshine State, just one person left.
“A lot of people are moving into Jacksonville from places like California and the East Coast because they can work remotely. They figure it’s a pretty good deal to pay no state income tax and live at the beach,” said Jacksonville Redfin agent Heather Kruayai. “Competition and prices are up and supply is down this year, partly due to those out-of-state buyers who sold homes in expensive markets and are buying homes using cash in Florida.”
South Carolina has the lowest tax rate in the U.S. It also has the 11th-highest in-migration rate (tied with Delaware), with five people moving in for every one person who left from 2013 to 2020. Texas, with the eighth-lowest tax rate in the country, also saw five people move in for every person who left.
“Three-quarters of my clients are moving to Austin from the Bay Area, and some are coming from other parts of California or New York,” said Austin Redfin agent Andrew Vallejo. “There are a lot of reasons to move to Texas, but for many homebuyers the fact that there’s no state income tax is one of the most attractive things. I have one client who moved his entire company from California to Texas because it has lower taxes. Low taxes are also motivating big companies like Tesla, Apple and Google to open offices in Austin, which brings in even more people.”
One effect of homebuyers chasing low taxes is rising home prices in low-tax states that are popular destinations: In Austin, for example, the average out-of-town homebuyer had a 32% higher budget than local residents and home prices were up more than 42% year over year to $465,000 in April. And while Texas doesn’t have an income tax, it does have relatively high property taxes. Higher home prices would result in residents paying even more in property taxes, which would further add to Texas’ cost of living.
“Low taxes are contributing to higher home prices in Austin,” Vallejo said. “With so many people moving here, especially those earning six figures and stock compensation from tech companies, prices are multiplying. Builders and sellers can price homes higher than they used to because buyers are willing to pay more.”
Parts of Nevada, Florida and Texas typically dominate Redfin’s list of most popular destinations for homebuyers moving to a different metro area.
States with high taxes typically lose residents
On the other end of the spectrum, states with high taxes tend to lose residents. New York, which lost more residents than any other state from 2013 through 2020 (for every eight people who left, just one person moved in) has the sixth-highest tax rate in the U.S. Note that recent data from the U.S. Census shows that the population of New York state unexpectedly grew over the last decade, based on births, deaths, immigration and domestic migration. The estimated data in this report is based only on domestic migration.
Illinois and New Jersey are both among the top four states in the country in terms of both taxes and the number of people moving away.
California also fits the pattern, albeit to a lesser extent. California has the highest tax rate in the country and while more people left the state over the last decade than moved in, it ranks number 15 in terms of out-migration, with about one person moving in for every three people who left.
One in five homebuyers cite lower taxes as a factor in moving to a different area
Twenty-one percent of homebuyers who are relocating cite lower taxes as one reason for their decision to move to a different area. The only factors more common than low taxes are proximity to family, desire to live somewhere more affordable and desire for a bigger house. That’s according to a recent survey of more than 600 Redfin.com users who have moved to a different metro in the last 12 months or plan to do so in the next 12 months.
“Tax rates are one factor for homebuyers deciding whether to move and which state they ultimately land in, but just how important they are is different for everyone,” said Redfin lead economist Taylor Marr. “When people have the flexibility to move to another part of the country, they consider factors like living close to family and friends, job opportunities, cultural amenities, and outdoor activities in addition to how much of their paycheck goes directly into their pockets.”
“Some people leave high-tax states and move to low-tax states because they’re seeking low taxes, but others make the move because relatively affordable housing, warm weather and business-friendly regulations are common in low-tax states,” Marr continued. “With pandemic-fueled remote work freeing more and more people to move across state lines, state governments and residents are likely to place a bigger emphasis on taxes. States losing residents, like New York and Illinois, may need to increase taxes to make up for the people moving away, which could result in even more people leaving. And people who are considering moving from one state to another may pay more attention to different types of taxes in calculating their overall living expenses: For instance, people moving to Texas may be more aware of its relatively high property taxes than they used to be.”
Outliers: High-tax states that are gaining a lot of residents
There are a few exceptions to the pattern: Arizona, Idaho and Colorado, for instance, have high taxes and high rates of people moving in from other states.
Arizona has the fourth-highest tax rate in the country and the second-highest in-migration rate, with just one person leaving the state for every seven people who move in.
“Almost all my buyers are from out of state, with most coming from Chicago and Seattle, especially now that a lot of people can work remotely. They come to Phoenix because homes are relatively affordable here,” said Phoenix Redfin agent Heather Mahmood-Corley. “Income taxes don’t come up much in our conversations, but buyers do appreciate the low property taxes in Arizona. I recently helped a couple buy a single-family home with a casita that was three times the size of the two-bedroom condo they sold in downtown Chicago. Their annual property tax bill in Arizona is the same as their monthly bill was in Illinois.”
Idaho and Colorado have the third- and fourth-highest in-migration rates in the country, with roughly seven people moving in for every one who leaves, and they’re both in the top quartile for taxes.
The data in this report is from a Redfin analysis of net migration to and from 48 U.S. states from 2013 to 2020. The migration rates for 2013 through 2019 are from the U.S. Census Bureau. 2020 migration rates are estimated based on an analysis that combines Redfin user data with U.S. Census Bureau statistics. Hawaii and Alaska are excluded because they’re extreme outliers in terms of migration. Migration rates are calculated in terms of net migrants per 1,000 residents: For instance, a migration rate of 8.2 means that for every ~nine people who moved into a state from 2013 to 2020, one person left the state.
The migration rate of each of the 48 states is correlated with property, sales, and income tax rates for 2020. This analysis uses stated tax rates for sales taxes and property taxes and the top marginal income-tax rate for each state. Each state included in the analysis is assigned a tax percentile based on an equally weighted combination of property tax, sales tax, and income tax rates, with the first percentile representing the lowest tax rate and the 100th percentile representing the highest tax rate. Sales and income tax data is from The Tax Foundation. Property tax data is from WalletHub calculations of U.S. Census Bureau data.
For the national average, the 15 states with the lowest taxes are considered “low-tax states” and the 15 states with the highest taxes are considered “high-tax states.” The migration rate for low-tax states is the mean of the rates for the 15 states with the lowest taxes, and the migration rate for high-tax states is the mean of those for the 15 states with the highest taxes.