When it comes to attracting people, jobs, and businesses, some states are just better than others. While the total US population increased 6.5% from 2010 to 2020, it increased 17.1% in Utah, 16.3% in Texas, 16.3% in Idaho, 16.1% in Nevada, 15.8% in Arizona, and 15.3% in Florida. Meanwhile, state populations declined in West Virginia, Illinois, New York, Connecticut, and Vermont, with very slow population growth elsewhere in the Northeast and Midwest.
At least three major tech companies are in the process of moving their headquarters from California to Texas; financial firms are moving operations from New York to Tennessee and Florida. Workers and businesses are voting with their feet.
This migration towards greener pastures has some worried. Why? The concern is that people leaving high-tax, less competitive states with the kinds of anti-growth government policies that have already driven businesses and workers away will bring to their new states the attitudes and voting habits that made their old states worse for business in the first place. Bad policy is bad policy, regardless of the zip code, let's not make the same mistakes in a new place.
Here's a game plan for states that have attracted so many newcomers to stave off the importation of bad policy. Ideas to keep these vibrant states vibrant.
First, states should refrain from adopting new tax systems layered on top of old ones, in particular introducing an income tax. It's simple, really: the more ways a state has to raise revenue, the larger the share of the state's economy the government will take. If a state doesn't yet have an income tax, the best option is to enshrine that status in the state Constitution.
Second, states should replace any defined-benefit plans for government workers with defined-contribution plans (401Ks). Traditional defined benefit plans provide disproportionate benefits to workers who remain at the same job the longest, even if they're no more productive than younger workers (and often less). A defined contribution system would incentivize less tenure with the government, which would help prevent the government from having workers with a built-in interest in simply growing the size of government.
