The most recent IRS migration data shows Kansas lost $364 million in Adjusted Gross Income from people who moved from Kansas to a state with a lower tax burden, and gained $129 million AGI from states with a higher tax burden. This is a strong indication that people are “voting with their feet” by moving to areas with lower tax burdens.
Kansas’s AGI loss
Taxes aren’t the only reason people move, but tax burdens weigh heavily on the cost of living, job creation, and other economic factors that families and their businesses face.
Nebraska and Iowa are the only regional states with a higher tax burden, according to the Tax Foundation. Kansas has the 33rd lowest tax burden, while Nebraska is #38 and Iowa is #34 based on calendar year 2022. But both states cut income taxes last year, while Kansas has still struggled to do so.
Kansas had a net loss of $158.8 million AGI to Florida, followed by Texas ($94 million) and Oklahoma ($23 million). Kansas had its highest net gain of $65 million AGI from California, with Illinois coming in second at $38 million AGI.
Between 2000 and 2022, Kansas had a net loss of 192,918 people moving to other states through domestic migration – that’s 7% of the state’s 2022 population.
Why do people move and what can Kansas do?
The number one thing that Governor Kelly can do to help alleviate the tax burden is to sign HB 2036 into law. This bill on her desk reduces the income tax rate, increases the standard deduction and personal exemption, exempts social security benefits from the income tax, as well as several other tax relief components. 2036 puts relief and trust in families to do the most with their money, not Governor Kelly’s megasubsidies to corporations. What’s more, regardless of what you hear elsewhere, Kansas can afford it.
Taxes are cost for people and businesses. A worker choosing to stay in Kansas has to foot the bill on their home, income tax, sales tax at the store, and other outlets. A business has to juggle its own basic finances along with government costs like taxation and staying in compliance with the regulatory burden. Historically and empirically, businesses have moved to places where they can minimize their costs – including taxation – and in doing so, bring innovation with them.
According to a paper by Harvard and University of Chicago economists, inventors were significantly less likely to locate to states with higher taxes. A company or industry founded in Kansas may stay here due to the high cost of moving – think of Wichita’s aerospace industry – but its unlikely for an adventurous start-up to choose Kansas to drop it roots down. It took over a billion dollars in taxpayer subsidies to persuade Panasonic to come to Johnson County.
High-tax states are suffering from these trends: since 2020, Illinois has lost a whopping 364,443 people from domestic migration. When people move, so does their money: AGI loss is causing Illinois to have economic problems as a result. 2023 was the 10th consecutive year of population decline for Illinois. Yet, the state still increases its budget plans, with the $52.7 billion spending plan for 2025 requiring a $898 million tax hike on the remaining population to accomplish it.
Favorable tax conditions, a willingness and openness toward the digital economy, and rapid housing growth have turned Miami into one of the start-up hubs of the 21st century. That same energy and commitment towards welcoming businesses, keeping families and their livelihoods at a low cost of living, and pushing innovation is something that could be done in Kansas as well. But it requires both eliminating the state’s wasteful spending on megasubsidies and bringing down the tax rates for everybody.
