Today’s Wall Street Journal includes an editorial arguing that high taxes cause people to move, and low taxes help determine where they go. What caught our eye was they reported data showing that it is more expensive to move from a high-tax city with declining population (Philadelphia and Los Angeles are given as examples) to cities in low-tax states with increasing population (Nashville, Dallas, Austin and Las Vegas are given as examples).
The Journal says “the eight states without an income tax are stealing talent from other states.” Do differences in the cost of moving by direction of the move provide supporting evidence of this hypothesis?
From the editorial (link temporarily available to non-subscribers):
We invite readers to visit the U-Haul Moving Company Web site (www.uhaul.com), where you can type in a pair of U.S. cities to learn what it costs to move from point A to B. If you want to move, say, from Austin, Texas to Southern California, the moving van will cost you $407 to rent. But if you want to move out of California to Austin, the same van costs $1,831. A move from Dallas to Philadelphia costs $663, versus $2,433 to swap homes in the other direction. The biggest discrepancy we could find was $557 from Nashville, Tennessee to Los Angeles, but the trip costs nearly eight times more, or $4,285, to move to Nashville from L.A.
The Journal says it’s much cheaper to move out of a low-tax jurisdiction (like Tennessee or Texas) to a high-tax jurisdiction (like Pennsylvania or California) than to move in the opposite direction. But it doesn’t explain why differences in the cost of moving, by direction of the move, should make any difference. We could imagine that low-tax jurisdictions have so much in-migration that U-Haul has a surplus of moving vans and has to discount them to get them out. Similarly, high-tax jurisdictions might have too few vans to support the market demand of all those who want to leave.
We were able to confirm the Journal’s figures exactly in one of its comparisons and approximately in the others. Still, it’s a big country and three examples selected based on undisclosed criteria provides very little evidence on which to draw reliable or valid inferences. So we checked out city pairs that the Journal had classified as both belonging in low-tax jurisdictions with significant net in-migration. If the Journal’s inferences are valid, there should be little difference in rates based on the direction of the move.
These differences turn out to be substantial. Moving from low-tax Nashville to low-tax Dallas costs $576, but moving from Dallas to Nashville costs $840. Moving from Nashville to low-tax Las Vegas costs $617, but going in the opposite direction costs $2,688. Austin to Las Vegas costs $876, but Las Vegas to Austin costs $1,693. Nashville to Austin costs $497, but Austin to Nashville costs $725. Even moves within large cities in the same low-tax, high in-migration state can differ a lot based on direction. Austin to Dallas costs $184, but Dallas to Austin costs $260.
Differences also are substantial within the same high-tax state. Moving from Los Angeles to San Francisco costs $357, but $220 in the opposite direction. It costs $1,170 to move from Los Angeles to Eureka, in Humboldt County, but only $369 to move back when you can’t stand it there any longer.
There is much more going on in the market for personal moving vans than the Journal’s simplified analysis suggests. U-Haul and other companies in this business have a lot of factors to take into account to match up the supply of equipment with market demand.