Analyzing State Population Growth Among Various Income Tax Structures

Abstract

While it was previously argued that gradual income taxation did not decrease population growth in Wisconsin, Iowa, and Minnesota, some still remain fixated that graduated income taxation will result in an outmigration of individuals to other states. This brief study analyzes population growth for each state from 2010 to 2019 and then seeks to determine if there is a correction or causation among specific income tax structures. If so, we would except that states with a specific tax structure (e.g. gradual, flat, or no taxation of income) to have greater growth the last decade.

Methodology

Population data was obtained through the U.S. Census Bureau. Each state was color coded to reflect their respective structure of income taxation. States colored red illustrate a flat income tax structure; yellow states illustrate no taxation of income; uncolored white states illustrate a graduated structure. Tennessee and New Hampshire are hybrids and labeled blue. These states technically levy gradual income taxation, but apply it to dividend and interest income.

To ascertain population growth over the ten-year period, the difference in population between 2010 and 2019 was calculated for each state. This number tells us the net population growth (or decline) between 2010 and 2019. States were then ranked on population growth or decline. Additionally, the percentage change in population was also calculated and ranked.

Key Findings

  • A state’s specific income taxation structure (graduated, flat, or no income taxation) was not correlated with net population growth or decline.
  • There was no correlation or causation among states that had higher net population growth and flat income taxation. Likewise, there was no correlation or causation among states that had gradual or no income taxation as well.
  • Income taxation structures among the top 20 states that experienced the highest net population growth over the ten year period are as follows:
    • Graduated: 9
    • Fixed: 5
    • No taxation of income: 4
    • Hybrid: 1
  • Income taxation structures among the top 20 states that experienced the highest percent change in population growth over the ten year period are as follows:
    • Graduated: 10
    • Fixed: 3
    • No taxation of income: 5
    • Hybrid: 1
  • Illinois was one of three states that experienced a population decline the last decade, losing more residents than any other state. Additionally, the state ranked second to last as a percent change in population. The state has a flat income tax structure.

Conclusion

There is no correlation or causation among a state’s population growth (or decline) and a specific income tax structure. Additionally, a specific income tax structure does not cause outmigration. While this study is not meant to be a breakthrough, its simplicity is meant to cut through false, preconceived notions pertaining to income taxation on population trends. The hope is that presenting verifiable and accurate data will help consumers deviate between factual and anecdotal evidence in approaching policy questions and analysis moving forward.

Data Set

Source: U.S. Census Bureau, Population Change and Rankings: April 1, 2010 to July 1, 2019.

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