A.S. at The Economist explains that people move to Texas because the taxes are low:
IN THE ten years I’ve lived in New York I forgot how to drive. Lately I’ve been spending lots of time in Austin, Texas. Enough so that I’ve had to start driving again. When you go many years without driving, it becomes terrifying. So to refresh my skills I took lessons with a wonderfully patient and brave woman who has taught driving in Austin for nearly thirty years. I expected to be one of her few adult students, but no. My instructor claimed in the past few years the number of adult students increased exponentially, not quite rivalling the number of teenagers. Most are tech workers who come from all over the world, drawn by the vigorous labour market. Adult driving students struck me as a rather interesting economic indicator. It doesn’t tell us anything we didn’t already know. Migration statistics reveal that people are moving in droves to Texas. Why? Jobs and no state income taxes. High earning New Yorkers and Californians can take home between 9% and 11% more of their income by moving to Texas. Every trip down I speak to at least one bitter New Yorker/Californian fed up with high taxes and cost of living.
Well . . . maybe. Texas certainly is growing rapidly, and it does have a relatively healthy labor market. But even though a lot of people are moving to Texas, it seems to me that California’s population is also growing at an impressive clip:
I suspect A.S. is being somewhat misled by this fascinating interactive tool which charts domestic migration only and thus gives the impression that certain places are experiencing massive net population flight when in fact they’re just attracting a lot of immigrants.
What’s more, though Texas certainly has lower-than-average taxes, it’s hardly the lowest tax state in the union. According to the tax foundation that prize is owned by Alaska (which is an unusual case) followed by Louisiana, Mississippi, South Dakota, West Virginia, New Mexico, Tennessee, Nevada, Alabama, and Kentucky which I don’t think is anyone’s top ten list of economic and civic dynamism. Conversely, the most-taxed states, Connecticut and New Jersey, are also the most prosperous.
The issue tax-wise, especially when it comes to state government that’s not involved in so much pure transfers, is value rather than levels. Paying relatively high taxes in exchange for excellent services is going to be fine for your state. Having subpar services paired with low taxes is also workable. The problem arises if your high taxes don’t actually deliver good schools or nice parks or functioning transportation.
Last, as Brad DeLong observes part of the issue with certain coastal metropolises like San Francisco is the “no one goes there anymore, it’s too crowded” phenomenon. If you get really good at attracting human capital then it gets expensive for people to live there which makes growth into a self-limiting phenomenon.