Americans tend to vote with their feet. Moving from one state to the next depends on which state offers them the best opportunity to thrive. Tax structures, regulations, and business climates - all handed down by their local elected officials - directly impact their decision-making process. After the US Census Bureau released its latest net domestic migration report last month, it’s become clear that elected officials from the low tax states made the right call.
Texas led the nation with the highest net in-migration from July 2023 to July 2024, gaining over 85,000 people. It was followed by North Carolina, South Carolina, Florida, and Tennessee. Together these states added nearly 350,000 new residents. What do they have in common? Low taxes, fewer burdensome regulations, and policies that foster economic opportunity. Those attributes attract individuals and businesses seeking a free enterprise environment where economic opportunity may thrive.
In stark contrast, states with policies that stifle competition and impose high costs on businesses continue to lose residents. For the fourth consecutive year, California experienced the largest net outflow, with nearly a quarter of a million people leaving during the 12-month period. In the last five years, the Golden State has lost more than 1.4 million people on net. That loss represents not only a dwindling population but a profound economic loss. Taxpayers, businesses, and jobs leaving the state compound the fiscal difficulties California is already juggling. In 2024, this contributed to a $47 billion budget deficit, forcing policymakers to deplete their rainy-day fund and raise taxes.
California’s struggles are not unique. Other high tax states like New York, Illinois, New Jersey, and Massachusetts are also experiencing significant outmigration. Combined, these five states lost nearly 500,000 residents on net according to the Census Bureau report. The common thread is an overreliance on high taxes, excessive regulation, and policies that discourage business growth. The irony is that the promise of fairness and security often produces the conditions that drive away those the states hope to serve.
Working with Dr. Arthur Laffer and Steve Moore over the past 17 years, and we have compiled the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, ranking states based on key economic policies. We’ve identified 15 policy variables—such as income taxes, property taxes, spending, and regulatory policies —that influence migration patterns. Our findings are clear: states with economically competitive policies attract the most people. In 2024, the top 15 states in our rankings all saw net domestic in-migration, proving that sound economic policies can help drive success.
West Virginia provides a striking example of how policy reform can reverse a state’s fortunes. Once known for economic decline and outmigration, West Virginia has seen a remarkable turnaround in the past few years. In 2008, the state ranked 38th in Economic Outlook in Rich States, Poor States. By 2024, it had improved to 23rd, and, more importantly, it had experienced four consecutive years of net in-migration (after decades of consistent out-migration). This success is largely due to policy changes that create a more competitive environment, including a reduction in personal income taxes, protecting workers with Right-to-Work legislation, and a strong emphasis on education freedom. West Virginia’s turnaround has inspired other states, with 12 adopting similar education reforms and 25 reducing income taxes since 2021.
The success of West Virginia and others demonstrates that both economic and educational freedom are powerful drivers of growth –especially so when a state pursues both. Four of the ten states attracting the most people have no income tax, and another four have flat personal income taxes.
The lesson for policymakers is clear: your policies have a significant impact on whether your state attracts or loses residents. States that embrace low taxes, minimize burdensome regulation, and foster individual freedom create environments where people and businesses thrive. In contrast, states that burden their residents with high taxes and stifling regulations will continue to see their citizens leave for more competitive states.
As we look ahead to 2025, it’s evident that the future belongs to states that prioritize economic and educational freedom. These states will attract growth, create opportunity, and foster the conditions necessary for long-term prosperity. The key to success lies in the understanding that sound policies are what truly drive economic progress. For hardworking taxpayers across America, that’s exactly what they voted for in November and what they will demand going forward.
