Taxation’s Effects on Migration in the US: Examining New Jersey’s High Tax Burden And its Implications on State Income

Abstract

This paper studies the relationship between state taxation and interstate migration. New Jersey’s tax structure presents the highest overall state tax burden in the country. It has the highest property tax burden in the nation and some of the highest corporate, individual income, and sales tax rates. Furthermore, it is one of only two states that levy both an estate tax and an inheritance tax. This paper examines overall migration trends, the top origins and destination of interstate migration, and the movement of adjusted gross income, as well as characteristics of migrants. It looks specifically at New Jersey while putting it in the context of the rest of the country. Finally, this is modeled through regression between migration variables (flows and rates of migration, income tax returns, income tax exemptions, and adjusted gross income) and tax variables (corporate taxes, individual income taxes, sales taxes, and property taxes, in terms of in-migration, outmigration, and net migration. The analysis finds that migration rates decline with increasing corporate tax rates. Net migration flows decrease with property taxes. The net migration rate for adjusted gross income decreases with corporate and property taxes, but increases with income tax. Further research can be done to explain the reasoning behind this and to show additional economic consequences of high tax burdens and migration.