In recent times, the news has been buzzing with stories of high-profile individuals like The Rolling Stones, Taylor Swift, NFL stars, and tech millionaires making strategic moves based on taxes. While you may not be a rockstar or a professional athlete, taxes could still be a crucial factor influencing your decision on whether to stay or go. In Kentucky, where the Bluegrass State has its unique charm, understanding the relationship between taxes and migration is more pertinent than ever.

Examining the Evidence:

Recent IRS data reveals a compelling connection between taxes and migration trends. Notably, nine out of the top 10 states experiencing the largest population gains from 2019 to 2020 had either no or low individual income taxes. In Kentucky, as we analyze these trends, it becomes clear that residents are considering the impact of taxes on their decisions to relocate.

Moreover, states with below-average state and local tax collections per capita witnessed more income tax filers moving in than out. In contrast, states with above-average collections faced an outbound migration trend. Kentucky, nestled in the heart of the nation, stands at a crossroads where understanding these dynamics is crucial.

The Influence of Taxes on Migration Decisions:

While correlation does not necessarily imply causation, various studies suggest that state and local taxes indeed affect migration. Technological advancements have made it easier for individuals and businesses to relocate, and this has likely intensified the impact of taxes on migration decisions.

Survey data from the Census Bureau indicates that factors indirectly related to taxes, such as property taxes and overall cost of living, play a role in people's decision-making processes. As Kentuckians, it's essential to recognize that taxes are at least one factor among many that influence our choices regarding where to call home.

The Impact on State Economies:

When people decide to leave a state, they take their earning power with them. IRS data from 2019 and 2020 underscore this point, showing that states losing population also experienced a decline in adjusted gross income (AGI). The reverse is true for states gaining population.

In 2021, California and New York lost significant AGI, translating to billions of dollars. Conversely, states like Florida gained both population and AGI. For Kentucky, understanding the potential consequences of such migration trends is vital for the state's economy and budget.

Policymaker Considerations:

While experts debate the significance of taxes in migration decisions, Kentucky policymakers must recognize that taxes do play a role, however small. With limited tools to attract residents, focusing on structurally sound tax policies with low rates becomes crucial. While not every state can offer warm weather and beaches, Kentucky can certainly prioritize policies that attract individuals with the promise of lower tax burdens, fostering economic growth, job opportunities, and increased wages.

In the heart of the United States, Kentucky stands at a crossroads, facing decisions that can shape its future. As Kentuckians, understanding the intricate relationship between taxes and migration is key to making informed choices about our homes, our communities, and our state. The evidence suggests that taxes matter, and as we navigate these decisions, policymakers can play a crucial role in ensuring Kentucky remains an attractive place to live and work. Contact us to start your home buying search in the Bluegrass!