The Washington State Experiment
Over the years, I’ve done numerous posts pointing to the fact that states without an income tax tend to grow faster than more highly taxed states. A part of that growth is related to the post-WWII sunbelt phenomenon. But not all. States lacking an income tax tend to grow faster than even nearby states with a similar climate.
Washington is another interesting case—one of the few northern states without an income tax. And Washington has also been one of the fastest growing northern states—until now. Here’s the Wall Street Journal:
An interesting natural experiment has been Washington state, which gained tens of thousands of people from other states on net each year in the last decade. But since enacting a 7% capital-gains tax on higher earners in 2021, Washington has been losing residents to other states at an accelerating pace—15,276 this past year. Could that be a reason, or is Seattle’s crime problem a better explanation?
I doubt whether crime is the decisive factor—Texas and Florida also have plenty of crime.
That’s not to suggest that taxes are the only issue. Strict zoning laws keep property prices high in places like California and New York, and that also slows population growth. But zoning cannot explain why Washington suddenly went from being a high growth state to a slow growth state. Taxes are very important, especially income taxes.