Close
ThinkAdvisor

Portfolio > Economy & Markets > Economic Trends

Relocating Homebuyers Choose Low-Tax States: Redfin

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • The only more common reasons for moving than low taxes are desire to be near family, live somewhere more affordable and have a bigger house.
  • As homebuyers seek lower taxes, home prices in popular low-tax destinations rise.
  • Arizona, Idaho and Colorado have high taxes and high rates of people moving in from other states.

Twenty-one percent of homebuyers relocating from one state to another cite lower taxes as a reason for moving to a different area, according to a recent survey of some 600 Redfin.com users who have moved to a different metro area in the last 12 months or plan to do so in the next 12 months. 

The only factors more common than low taxes are proximity to family, desire to live somewhere more affordable and desire for a bigger house. 

In an analysis of estimated migration to and from 48 U.S. states from 2013 to 2020, Redfin found that for states with the lowest taxes, an average of four people moved in from other parts of the country for every person who left. 

The trend is reversed in high-tax states, where an average of 2.5 people left for every one person who moved in.

The analysis of estimated migration correlated with rates of sales tax, income tax and property tax in 2020. For the national average, researchers considered the 15 states with the lowest taxes “low-tax states” and the 15 states with the highest taxes “high-tax states.” They excluded Hawaii and Alaska because they considered them extreme outliers in terms of migration. 

Low-Tax States

Nevada, which has the country’s sixth-lowest tax rate, 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. 

Florida, with the seventh-lowest tax rate in the country, gained more residents than all but four other states from 2013 to 2020. For every seven people who moved into the Sunshine State, just one person left. 

South Carolina has the lowest tax rate in the U.S., and ties with Delaware for the 11th-highest in-migration rate, with five people moving in for every one person who left from 2013 to 2020. Texas, with the eighth-lowest tax rate in the country, also saw five people move in for every person who left.

Not surprisingly, one effect of homebuyers chasing low taxes is rising home prices in low-tax states that are popular destinations. Take Austin, where the average homebuyer from out of town had a 32% higher budget than local residents and average home prices went up more than 42% year-over-year to $465,000 in April. 

While Texas has no income tax, it does have relatively high property taxes. Higher home prices would result in residents paying even more in property taxes, which would further add to Texas’ cost of living, according to Redfin.

High-Tax States

New York has the sixth-highest tax rate in the U.S. From 2013 through 2020, the state lost more residents than any other: eight for every person who moved in. 

However, Redfin pointed out, recent U.S. Census Bureau data showed that New York state’s population grew over the past decade, based on births, deaths, immigration and domestic migration. Redfin based its estimated data 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. 

California also fits the pattern, though to a lesser extent. The state has the highest tax rate in the country, but ranks 15th in terms of out-migration, with about one person moving in for every three people who left. 

Net migration by total tax level Click to enlarge. (Chart: Redfin)

Outliers

Redfin’s analysis identified a few exceptions to the migration pattern: Arizona, Idaho and Colorado, for instance, have high taxes and high rates of people moving in from other states. 

Arizona has the fourth-highest tax rate in the country and the second-highest in-migration rate, with just one person leaving the state for every seven people who move in.

According to a local agent, most in-movers come from Chicago and Seattle because Phoenix has relatively affordable homes for sale. Income tax appears to be a lower concern, though buyers appreciate Arizona’s low property taxes, she said.

Idaho and Colorado, both in the top quartile for taxes, have the third- and fourth-highest in-migration rates in the country, with about seven people moving in for every person who leaves. 

(Photo: Shutterstock)

— Related on ThinkAdvisor: