You know that residents are fleeing blue states like New York and California because money goes where it’s treated best. High taxes in the blue states have sent millionaires and billionaires, along with many wage earners, heading for states where taxes are lower and affordability is better. Places like Texas, Florida, and Tennessee are the destinations most often mentioned.
In The Wall Street Journal, Stephen Moore explains that many people who flee high tax states for low tax states already give themselves a raise by doing so. But if Senators like Elizabeth Warren and Bernie Sanders get their way and eliminate the cap on Social Security taxation, effectively raising the highest federal tax bracket to 52%, it will only make it more appealing to flee high tax states. That’s in contradiction to the logic of Warren and Sanders, who say higher federal taxes will discourage flight from high tax states. Moore explains:
Consider a successful couple living in Beverly Hills, Calif., or Manhattan with a joint income of $5 million. The top marginal state and local income-tax rate in California and New York City is between 14% and 15%. The highest federal tax rate is roughly 40%. So in California and New York a wealthy couple pays a combined tax rate of 54% and keeps 46 cents of each additional dollar they earn.
If they move to Florida, Tennessee, Texas or another state with no income tax, they keep 60 cents instead of 46. They’ve given themselves a 30% pay raise. If they live in a state with approximately a 10% income tax—such as Massachusetts, Minnesota, New Jersey, Vermont or Washington—they get a roughly 22% after-tax pay raise by moving to Florida or Texas.
Some Democrats think they can discourage interstate tax migration by raising federal taxes. Sens. Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts have proposed eliminating the income cap on the Social Security payroll tax, which would raise the effective federal tax rate by 12.4 points. One Republican, Sen. Bernie Moreno of Ohio, has also endorsed this idea.
Yet these proposals would heighten the incentive to flee high-tax states. With the Social Security cap gone, the federal tax on income would be roughly 52%. A Californian or New Yorker would pay a 66% combined rate and keep 34 cents of each additional dollar he earns. In Florida or Texas he would keep 48 cents. So the tax filer would now boost take-home pay by roughly 41% by moving.
Action Line: As Moore explains, making it worse at the federal level won’t make it better at the state level. When you’ve had enough, and you decide it’s time to look for a better America, begin your search with Your Survival Guy’s 2026 Super States, and click here to subscribe to my free monthly Survive & Thrive letter.
