#131 Abraham & Wealth Migration

By D. Arnott | July 21, 2022
the christian economist dave arnott

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#131 Abraham and wealth migration

Abraham moved because God told him to.  Americans are moving from California and New York to Florida and Texas because the economy is telling them to.  

 

Abraham moved because God told him to.  Americans are moving because the economy is telling them to.  Predictably, they are moving from high tax states to low tax states.  The data to show the movement comes from a government report, so it’s a little out-of-date, but it still proves the basic economic law stating that the demand curve goes down.  That means:  All else being equal, people seek the same products and services at lower costs.  The data is from 2020, and it comes from a Wall Street Journal article titled The Great Pandemic Wealth Migration.  

Social scientists spend their entire life waiting for a natural manipulation like the pandemic to see how people will respond.  The reason it was such a golden opportunity was, many people stopped working, so they could CHOOSE where to live.  Given a choice, economists expect people to choose locations with lower taxes, and guess what: They did.

The data comes form IRS filings, so it’s based on adjusted gross income.  In 2020, Florida gained $23.7 billion, Texas $6.3 billion.  Arizona, North Carolina, South Carolina, Tennessee, Nevada, Colorado, Idaho and Utah gained less than $5 billion each.  

The losing states are so predictable.  I’ll employ a teaching technique I use in my econ classroom at Dallas Baptist University: Go ahead, shout out the two states I’m about to say…….and you’re right: The biggest losers, by a LOT, are New York who lost just under $20 billion and California who lost just under $18 billion in income, based on IRS tax returns.  This data is so predictable: States 3-5 on the losers list are Illinois, Massachusetts, and New Jersey.  Also-rans among the losers are Maryland, Ohio, Minnesota, Pennsylvania and Virginia

Although the data is getting old, there is much more about this in the 2014 book An Inquiry into the Nature and Causes of the Wealth of States.  Two of the authors are well-known: Arthur Laffer and Steven Moore.  The sub-title is “How taxes, energy, and worker freedom change everything.”  Well, of course they change everything.  Given a choice, people would rather pay lower taxes, lower energy costs and have more freedom to sell their labor.  It’s just that the pandemic put people out of work, and made it easier for them to move.  Ceteris paribus means “All else being equal.”  The ceteris was not paribus any longer.  

Not surprisingly, four of the ten states that gained the most income in the IRS data impose no income tax: Florida, Texas, Tennessee and Nevada.  Go figure.  

 

Taxes

In our book, Biblical Economic Policy, Sergiy Saydometov and I state that taxes are stealing, and thus, are a violation of the eighth commandment.  Civil societies allow them because we live in a fallen world and they are necessary to control evil.  High-tax proponents, usually Democrats, see taxes as a means of punishing wealth and as a means of income redistribution.  They are so far along that path that I think to present them with a Biblical view of taxes would just astound them.  

Their assumption about punishing wealth is certainly not Biblical, and their assumption that taxes should be used to redistribute wealth is a violation of the tenth commandment: Don’t covet.  Most conversations about income inequality are violations of the tenth commandment.  And now, states are finding out that given a choice – people would rather live in low-tax, rather than high-tax states.

See, if you got more for your high taxes, that might be worth considering.  But people who live in high tax states don’t get more.  The schools are not better, and the roads are not better.  That’s because of the fallen nature.  Politicians are good at pointing out the fallen nature of business-people, but are very bad at seeing the fallen nature among people who work in the government.  They are fallen, I’m pretty sure of it.  

There’s an old ethics story about a guy from a Central American country who visits an Asian country and the governmental official says, “See that bridge over there?  10% in my pocket.”  Later in the story, the Asian official visits the Central American official who says to his visitor, “See that bridge over there?”  The confused Asian responds, “There is no bridge there.”  The proud Central American proclaims, “100% in my pocket.”  Okay, it’s a mythical story, but with the Biden Administration requiring Federal projects be built by Union labor, isn’t that buying about 10% of the American vote?  10% in my pocket????  

 

A Country Divided

In podcast #72, I explain how the United States is being split into “Two Worlds,” Half with the Christian worldview, and half with other worldviews.  That’s a worldview split, and what we’re seeing now is the geographic enactment of that split.  On a more micro level, conservative folks in Eastern Washington and Oregon are talking about leaving their liberal brethren, and joining more conservative Idaho.

This split is obvious in other national politics.  The Lombard party in Northern Italy has wanted to split the country in two for many years.  That’s because the more Germanic northern provinces were ceded from the productive Austro-Hungarian empire to Italy after World War I in 1918.  Going back even further, Italy was composed on two regions in 1861: Northern Italy and Southern Italy.  That’s the political side.  Now for the economic impact:  If you draw a horizontal line through Rome: Northern Italy produces the tax revenue, and southern Italy consumes it.  There is a story about how the centralized Catholic church contributed to this split when the Pope ran parts of Central Italy for over a thousand years, from the 8th to the 19th century.  But I will refrain from that history lesson today and move two countries west.

The Catalonians in Spain have wanted to form their own country for years.  The Barcelona region is more productive, and thus wealthier than the other provinces, and of course, they pay more into the National purse in Madrid.  It’s a split similar to the one that’s going on in America today.  

I’m sorry to say that quite often these splits are intentional.  Politicians have done finger-print level analysis to split groups into ever-smaller groups to appeal for their votes.  In the process, they are changing E pluribus unum into E pluribus pluribus.  Don’t miss the Christian aspect of this split.  As I explain in podcast #72, the split is based in worldview differences. 

Dennis Prager says you can find the three American values on a coin: E pluribus unum, liberty, and in God we Trust.  The movement of people described in the 2020 IRS data splits the country into two groups:  Those who want E pluribus unum, liberty, and In God we Trust, from the group who does not support those three concepts. 

 

Markets

What’s this have to do with the economy?  I think two economies will emerge, and based on the latest IRS data, it looks like it will divide by states.  Markets will carry the day in traditional states, where you can expect more free-market competition in education, entertainment, housing, energy, and transportation, among others.  

I’m still thinking about the quote from Whole Foods founder John Mackey, “Capitalism is humanity’s greatest invention.”  Then, is taxing humanity’s worst invention?  I’ll make it easier: defeating capitalism is humanity’s worst invention.  Then, the states who are chasing free-market devotees out of their states are participating in humanity’s worst invention.  

Oh, since I work in the education industry, I’ll just add this comment: Since I am on the faculty of a private University, I am really anxious for free college to pass the legislature.  If you have a basic understanding of economics, you know that what is offered free decreases in quality, and what people pay for increases in value.  So, it will clearly create a two-tiered education system with state colleges having the worst students, faculty and staff, and the best students, faculty and staff will move up to places like Dallas Baptist University.  My self-interest means I’m pretty anxious for free college. 

 

Companies

There’s a company-level analysis of this movement also. Caterpillar announced they were moving out of high-tax Illinois, to low-tax Irving, Texas, just down the street from where I teach at Dallas Baptist University.  We are happy to welcome them to town.  They will pay high salaries, create great wealth, and increase the market consumption in North Texas.  Also, recently, Boeing announced they are leaving Chicago also, for Arlington, Virginia. 

 

Moving to Avoid Powerful Governments

I began the podcast talking about people movement in the Old Testament.  There was some movement in the New Testament also: You will remember that Joseph and Mary fled from Bethlehem to Egypt to avoid the autocracy of King Herod.  So people really DO move to avoid powerful governments.  

FEAR GOD,
TELL THE TRUTH,
EARN A PROFIT.

 

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