How Money Walks - How $2 Trillion Moved Between the States, and Why It Matters

by Travis H. Brown

Between 1995 and 2010, millions of Americans moved between the states, taking with them over $2 trillion in adjusted gross incomes. Two trillion dollars is equivalent to the GDP of California, the ninth largest in the world. It’s a lot of money. Some states, like Florida, saw tremendous gains ($86.4 billion), while others, like New York, experienced massive losses ($58.6 billion). People moved, and they took their working wealth with them. The question is, why? Why did Americans move so much of their income from state to state? Which states benefitted and which states suffered? And why does it matter?Using official statistics from the IRS, How Money Walks explores the hows, whys, and impact of this massive movement of American working wealth. Consider these facts. Between 1995 and 2010:The nine states with no personal income taxes gained $146.2 billion in working wealthThe nine states with the highest personal income tax rates lost $107.4 billionThe 10 states with the lowest per capita state-local tax burdens gained $69.9 billionThe 10 states with the highest per capita state-local tax burdens lost $139 billion Money—and people—moved from high-tax states to low-tax ones. And the tax that seemed to matter the most? The personal income tax. The states with no income taxes gained the greatest wealth, while the states with the highest income taxes lost the most. Why does this matter? Because the robust presence of working wealth is the leading indicator of economic health. The states that gained working wealth are growing and thriving. The states that lost working wealth lost their most precious cargo—their tax base—and the consequences are stagnation, deterioration, an economic death spiral as they continue to raise taxes and lose people, businesses, and working wealth. The numbers don't lie.___________________“When I read How Money Walks, I thought, ‘It’s about time.’ Finally, we have a book that addresses one of our nation’s most critical (yet rarely discussed) fiscal the migration of working wealth as a direct result of personal income tax rates. Brown’s book paints a clear portrait of where money goes and why. How Money Walks should be required reading for anyone who wants to understand why some states struggle to retain people and businesses while others welcome billions of new dollars each year.”Dr. Arthur LafferFounder and chairman, Laffer Associates and Laffer InvestmentsFormer economic advisor to President Ronald Reagan

241 pages, Kindle Edition

First published January 1, 2013

Reviews

[Eddie · Rating 4 out of 5]

Standard IRS data leads to an incredible assumption: Americans are fleeing high tax states, taking with them every penny they earn, and are moving into low or no tax states. $2 trillion from 1995-2010 moved between states. Travis shows us the winners (Florida, Texas) and losers (California, New York) in the tax reform debate. The book is repetitive and adolescent in its presentation and writing, but it doesn't matter...every Governor should read this and make change.

[Ryan · Rating 1 out of 5]

This book was a supreme disappointment.

The author's premise is that states with high income tax rates are losing high income earners to states with low income tax rates. For example, between 1995 and 2010, the state of California (with a top personal income tax rate of 13.3%) lost a total of $31.8 billion in aggregate income, much of it to its zero-income-tax neighbor, Nevada. The individuals moving their income out of state are job creators, producers, and wealthy individuals, thus draining these states of valuable human capital.

The problem is, there is no rigorous statistical analysis in Mr. Brown's book. Zero. Nada. Zilch. He simply scrubbed 15 years worth of IRS data (and for this he does deserve kudos) and stated that there is a correlation between the migration of income, and the tax rates of the traded states. He doesn't go so far as to say that there is causation, and unfortunately he doesn't dig deep enough into the statistics to offer any hint of significance.

I have met a few individuals who have anecdotally confirmed the premise of this book (they chose to move their small businesses from San Francisco to Reno or Las Vegas purely because of California's state tax burden). The wealth that they took out of the state is significant. But this book, which is supposed to be telling their story, does not do them justice.

[Stanley Arthur · Rating 4 out of 5]

The title says it all. People vote with their wallets and sometimes this means voting with their feet. Our Founding Fathers chose federalism because they knew the individual states would be cauldrons of experimentation revealing to the rest of the nation which policies were effective and which were not. They were wise. It is working.