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Jun 05, 2009 -- The economic impact of high tax states vs. no tax states

Clark has long believed high tax states suffer mightily as entrepreneurs and large businesses naturally move away because of unfavorable tax policies. In his mind, it's a simple issue of business wanting to follow the path of least resistance and keep more of each dollar it generates.

Now his belief is substantiated in a new study out of Ohio University, according to The Wall Street Journal. Over the course of 10 years, the study found that states with no state income tax created 89% more jobs than states with high taxes. Personal income was also 32% larger in states with no state income tax.

And it's not just geography that's a factor here; states with no tax are all over the country.

Look at New Hampshire vs. Massachusetts as an example. New Hampshire has steadily gained more company headquarters and entrepreneurs as people flee neighboring "Taxachusetts" and Vermont to cross the border into the "Live Free of Die" state.

More than 1,100 people move from the 9 highest income tax states to states with no income tax every single day. But it's not only states that are competing with each other for residents and businesses. Jobs can migrate around the globe, so we need to keep our taxes low to retain the best opportunities.

States may have to make the difficult decision to offer fewer services instead of raising taxes. Government can't provide everything we want without consequence.

Unfortunately, Clark won't be able to answer any questions submitted via commenting. If you have a question, please try posting it to our message boards.

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What others are saying

  • State Taxes
    Your story really resonates with me since I live in the ultimate tax-and-spend, welfare-based, business-averse state of California. As a result, we are currently in one of the worst budget crises in U.S. history!
  • Finad all rates
    Google "taxes by state - vox"
  • A few comments on the comments already posted..
    Regarding Penn. having a lower unemployment figure than Florida, that simply is due to Florida being such a high growth state for so many years. People were flocking to Florida by the millions, while Pennsylvania's population was largely stagnant. Florida also had tons of construction jobs to fill during the real estate boom as well. Thus, its only natural that Florida would get hit so hard by this. Simply put, the fast growth states like Florida and Georgia naturally are going to crash harder than more stagnant states like Penn. and Ohio.

    I liked the comment regarding high tax vs. low tax countries---dead on. The U.S. currently has the 2nd highest corporate tax rate in the world (only Japan is higher), and to make matters worse the politicians are talking about raising them even higher. Basically, the government continues to raise taxes, then turn around and wonder why companies are moving jobs oversees (and loudly complain about it). Quite amazing, isn't it? Overall, I'm an optimist by heart, but we are in for some rough times ahead, thanks to both the GOP and dems. Obama's socialist policies (actually fascist is more accurate) simply will only make things worse. GWB wasn't much better.

    The booming 90's and early-mid 2000's are already becoming a distant memory in which we lived in ignorant bliss and really didn't know just how good we had it. Those days are long gone and I'm not sure when such days will return again, if at all.
  • Comrade Soseealism Sam!!!
    My gdrate fdrend, Soseealism Sam has good point! He is smadrt man. Once ALL capeetalist pigs have been taxed to death, will they see the light in turning to mothedr Amedeeka for all needs. All must stdive hadrd for the good of all. No more of this wordking hadrd fodr you and youdr family. You must become a pardt of new wordld order! USSA! And oudr Supdreme Leadedrs, Badak Husein Obama, (ROAR) and Comarade Nancy Peloski, (ROAR)!
  • Taxes
    Interesting facts. Some things I'd like answered though is why Florida where I live now has an unemployment rate of 10% while PA where I moved from is at 8%. Taxes are higher in PA and lower in Florida, though you ask a Floridian you'd think they paid 90% of there income in taxes. I figure my total tax (federal state local), including sales tax is about 22% here(FL) and about 28% in PA. Income tax is just dumb and so are all these "fees" (taxes) they now impose instead of just adjusting the sales tax which is a consumption tax and if you don't spend money on stuff you pay less in taxes. We need to decide exactly what we want the government to provide or subsidize and expect to pay the rest. Also remember that is the governement collect exactly the same dollar amount every year the amount of services they can provide decreases by the rate of inflation. Just some thoughts.
  • Taxes
    Not only are people moving to lower income states, but I just heard that Microsoft will be moving some jobs overseas if Obama's tax increase goes through. The only economy we are stimulating is the ones overseas
  • Taxes: Outragious
    It is outragious that rotten small business entrepreneurs would avoid taxes. This country was built on being fair to all...not avoiding civic responsibilities to our fellow man.

    The only REAL way to overcome our government going bankrupt from tax avoidance is the following:
    1) Tax all non-minorities at a higher tax rate than minorities...a long needed extension of life-giving affirmative action. It is a well-known fact that non-minorities make higher incomes than minorities.
    2) Tax all homophobes at a higher rate too. CNN found that Homophobia is the biggest crisis this free nation is facing (next to abortion) and higher taxes and government control can eliminate this.
    3) All people found avoiding excessively high tax states should be put in government controlled prisons...forever. Dam*** traitors!

    People hiding and protecting tax avoiding non-minorities, homophobes, and greedy entrepreneurs should also be put into government controlled labor prisons. This labor from criminals could reduce the costs of government made goods....like cars...and help us compete with China and Japan)! Its win-win for all (Except the criminals of course...hahaha)

    I just hope our couragious bankers and politicians can get this passed before its too late.

    Only then can this country truly be what our founders intended...FAIR and just to all.
  • Business Greed vs. American Needs.
    Anything we can do, great Communist China can do for just a few dollars a day. So if all these business migrate to lower cost micro economic they simply bleed American out of a meaningfull existant. Furthermore, Europe makes more per hour, have higher taxes and much better benefits. In fact I bet the country with happiest citizen must be from Europe.
  • Tax states
    Lets take N.Y and California, esp N.Y.C. they have taxed those people into poverty, they will not only pay a state income tax but a city income tax too, along with all the other taxes they pay. Many realiaze now the sun doesn't rise and set on N.Y. City. I know many that are just STUCK there. Many make a high gross but when all the taxes are taken out, it is cut way down. Even Wall Street wanted to leave the city, but they cut a deal with them to stay. Just think where would N.Y.C. be without Wall Street.
  • states
    Clark, your editors need to actually proof read your columns it's not "Live Free of Die" it's Live Free OR Die.
  • low tax states
    due to the extremely progressive nature of state income taxes and the fact that a very small percentage of taxpayers in a state pay a high percentage of the personal state income tax, people will move to low or no income tax states. And it is precisely these people, the high income people that have the means to move as they either generate high passive type income (interest, dividends or capital gains) or their job allows them to live anywhere. And once they move their tax bill moves with them.
    Same goes for business income. In alot of instances, a business can have nexus (business presence) in any state they want as their product or service can be delivered from anywhere without regard to borders without creating nexus (tax liability) in a high tax state. Brick and mortor manufacturers are a dying lot and even they are being driven out of high tax states like california, new york, etc. the politicians need to wake up, but i doubt they will. california especially is a lost cause.
  • High Taxes
    The same can be said for high tax countries versus low tax countries. There is already a movement of business out of the USA to places like Switzerland, Dubai, Ireland, etc. It will accelerate under Obama. It is already becoming clear that Obama's legacy will be high unemployment and even higher inflation. We will no longer be a superpower. But at least this country has paid homage to the god of diversity.
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