Low Taxes Draw People to Texas, Fla., Nev. #Inflow

HOUSTON – (By Dale King, Realty News Report) – Next time you bid farewell to a fellow Texan who’s decided to pack it up and hit the trail heading out of state, prepare for an unequal and opposite reaction.

A new report from the Redfin real estate brokerage, says Texas, which has the eighth-lowest tax rate in the country, saw five people move in for every one that moved away. The trend is reversed in high-tax states, says Redfin, where an average of 2.5 people leave for every one person who sets down new roots.

While the coronavirus pandemic drew attention to the levels of in- and out-migration during the past year or so, Redfin says it started tracking this population movement back in 2013.

“Nevada, Florida, South Carolina and Texas are prime examples of low-tax states that are attracting new residents,” says Redfin’s Dana Anderson, who writes about the numbers behind real estate tendencies.

“Nevada,” she said, “gained more residents than any other state over the last eight years—for every nine people who moved into Nevada from 2013 to 2020, just one person left—and it has the sixth-lowest tax rate in the country.”

For states with the lowest taxes, an average of four people moved in from other parts of the country for every one person who left during the last eight years, notes the Redfin analysis of estimated migration to and from the 48 continental U.S. states, correlated with rates of sales tax, income tax and property tax in 2020.

Hawaii and Alaska were excluded because they are extreme outliers in terms of migration, Anderson says.

The Migration Super-Highway Leads to Austin

A Redfin agent in Austin took the temperature of the Texas real estate market in the capital city which has attracted some major corporations out of high-tax states like California.

“Three-quarters of my clients are moving to Austin from the Bay Area, and some are coming from other parts of California or New York,” said Andrew Vallejo of Austin. “There are a lot of reasons to move to Texas, but for many homebuyers, the fact that there’s no state income tax is one of the most attractive things.”

“I have one client who moved his entire company from California to Texas because it has lower taxes. Low taxes are also motivating big companies like Tesla, Apple and Google to open offices in Austin, which brings in even more people.”

One impact of homebuyers chasing low taxes is rising home prices in low-tax states, says Redfin. In Austin, said Vallejo, “the average out-of-town homebuyer had a 32% higher budget than local residents and home prices were up more than 42% year-over-year, to $465,000 in April.”

“And while Texas doesn’t have an income tax, it does have relatively high property taxes. Higher home price would result in residents paying even more in property taxes, which would further add to the Texas cost of living.”

“With so many people moving here, especially those earning six figures and stock compensation from tech companies, prices are multiplying. Builders and sellers can price homes higher than they used to because buyers are willing to pay more.”

Anderson says parts of Nevada, Florida and Texas “typically dominate Redfin’s list of most popular destinations for homebuyers moving to a different metro area.”

Around the nation, Redfin says Florida has the seventh-lowest tax rate in the country and gained more residents than all but four other states from 2013 to 2020. For every seven people who moved into Florida, just one person left.

“A lot of people are moving into Jacksonville from places like California and the East Coast because they can work remotely,” a nod to the COVID situation, said Jacksonville-based realty agent Heather Kruayai. “They figure it’s a pretty good deal to pay no state income tax and live at the beach.

“Competition and prices are up and supply is down this year, partly due to those out-of-state buyers who sold homes in expensive markets and are buying homes using cash in Florida,” she adds

The Redfin analysis says South Carolina has the lowest tax rate in the U.S. It also has the 11th-highest in-migration rate (tied with Delaware), with five people moving in for every one person who left from 2013 to 2020.

On the other end of the spectrum, states with high taxes tend to lose residents. New York, which lost more residents than any other state from 2013 through 2020 (for every eight people who left, just one person moved in) has the sixth-highest tax rate in the U.S.

Anderson does note that the population of New York state “unexpectedly grew over the last decade, based on birth, deaths, immigration and domestic migration. The estimated data in this report is based only on domestic migration.”

Illinois and New Jersey are both among the top four states in the country in terms of both taxes and the number of people moving away.

Calif.: Highest Tax Rate in the Country

California also fits the pattern, albeit to a lesser extent, Redfin notes. The Golden State has the highest tax rate in the country and while more people left the state over the last decade than moved in, it ranks number 15 in terms of out-migration, with about one person moving in for every three people who left.

Anderson, Redfin’s writer, also analyzed the psyche of homebuyers. Twenty-one percent who are relocating cite lower taxes as one reason for their decision to move. The only factors more common are proximity to family, desire to live somewhere more affordable and desire for a bigger house.

Illinois and New Jersey are both among the top four states in the country in terms of both taxes and the number people moving away.

“Tax rates are one factor for homebuyers deciding whether to move and which state they ultimately land in but just how important they are is different for everyone,” said Redfin lead economist Taylor Marr. “They consider factors like living close to family and friends, job opportunities, cultural amenities and outdoor activities in addition to how much of their payment goes directly into their pockets.”

“Some people leave high-tax rates and move to low-tax states because they’re seeking low taxes, but others make the move because relatively affordable housing, warm weather and business-friendly regulations are common in low-tax rates,” Marr adds.

There are a few exceptions to the move-in, move-out pattern. Arizona, Idaho and Colorado, for instance, have high taxes and high rates of people moving in from other states. Arizona has the fourth-largest tax rate in the country and second highest in-migration, with just one person leaving for every seven arriving.

Idaho and Colorado have the third- and fourth highest in-migration rates in the nation, with roughly seven people moving in for everyone who leaves, and they’re both in the top quartile for taxes.

For more about Texas real estate, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon http://tiny.cc/4a2g6y

File: Population. Migration.Low Taxes Draw People to Texas, Fla., Nev. Redfin.