The South is Rising: Dixie States are Growing While the Northeast Shrinks

By Published on January 24, 2024

Over the past few years, states in the American South have come to economically surpass the Northeast, owing to policies like lower taxes and better business environments spurring prosperity and population growth, experts told the Daily Caller News Foundation.

The gross domestic product of Florida, Texas, Georgia, the Carolinas and Tennessee surpassed the cumulative economy of the Northeast in 2020 for the first time since data has been tracked and has continued to exceed growth since, according to data from the Bureau of Economic Analysis compiled by Bloomberg. The growth comes as businesses and people flock to the region seeking affordability, job opportunities, lighter tax and regulation laws and freedom from dense urban areas, according to experts who spoke to the DCNF.

“The main driver of growth differentials between the states is public policy,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “This includes tax and regulatory policy, both of which vary wildly between states. Because the South, on average, has states with lower tax burdens, less burdensome regulation, better business climates, and more worker freedoms, these states also average faster growth.”

Five Northeastern states are in the top six in terms of tax burdens in 2023, led by New York, Maine, Vermont, Connecticut and New Jersey, with burdens of 12.47%, 11.14%, 10.28%, 9.83% and 9.76%, respectively, according to data from WalletHub. In contrast, Southern states posting huge growth were well below the median in terms of tax burdens, with Florida ranking 46th with a tax burden of just 6.33% and Tennessee ranking 47th with 6.22%, according to WalletHub.

“They also attract people to move there from states like California, Illinois, and New York — states that have extremely unfavorable conditions to sustainable economic growth,” Antoni told the DCNF. “During the pandemic, remote work became more mainstream so that people were no longer stuck living near a corporate headquarters or central office in places like Los Angeles, Chicago, and New York City. People chose to leave for lower-tax states, which also often are safer places to live with lower crime rates.”

The South has seen the largest increase of any U.S. region in terms of population from July 2020 to July 2023, recording an increase of more than 3.6 million people, while the West added 235,424 people, according to data from the Census Bureau analyzed by the DCNF. The Northeast and Midwest’s populations shrank by 446,960 and 60,511 in that time period, respectively.

States with the biggest outflows of people from July 2020 to July 2023 were California, New York and Illinois, whose populations declined by 538,007, 533,494 and 240,668, according to the Census Bureau. Texas notched the biggest increase in the time period as transplants from other states like California flocked to the area, adding over 1.2 million people, followed by Florida at 1 million and North Carolina at 381,679.

“A significant attraction is the absence or reduction of state income taxes in states like Florida, Texas, and Tennessee, making them desirable destinations for working people,” Peter Earle, an economist at the American Institute for Economic Research, told the DCNF. “Living expenses in states such as California and New York, particularly in major urban centers like New York City and San Francisco, are at record levels — shelter costs, in particular. In contrast, states like Florida and Texas offer the potential for notably lower costs related to housing, taxes, and day-to-day expenditures.”

Costs of living outside of the South face pressure from regulations and higher taxes, with California boasting the highest average home cost at $793,600, followed by Hawaii and New York at $714,100 and $649,000, respectively, according to Bankrate. Meanwhile, states like Texas, the Carolinas, Louisiana and Kentucky boast median home prices between $240,000 and $365,000.

In terms of total regulations, the West Coast boasts huge burdens, with California having 403,774 regulations, while Oregon had 209,207 and Washington had 200,364 as of 2022, according to data from the Mercatus Center at George Mason University. While western states like Idaho and South Dakota boast the lowest number of regulations, states in the South had, in general, around 100,000, except Texas and Florida, which had more largely due to their population sizes.

Federal regulations alone created $1.939 trillion in added costs for Americans in 2022, exceeding every form of tax except income, with state regulations adding onto that burden depending on the state and how many costly regulations they have on the books.

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Manufacturing has also been a strong driver of growth in the South, with the region slowly cultivating a strong automotive industry since the 1970s and 1980s, bringing in foreign companies like Volvo, Mercedes-Benz, BMW, Toyota and Hyundai, according to CNN. The South’s looser labor laws are largely to thank for the increase in automotive positions, while Midwestern jobs at Ford, General Motors and Stellantis have been in decline as union demands raise operating costs.

“States such as Florida and Texas typically enjoy a milder and warmer climate when compared to the colder northeastern states,” Earle told the DCNF. “For older Americans, retirement in Florida and other Southern states has led to a well-established infrastructure and streamlined processes for retirees, making it considerably more straightforward than in less sought-after retirement destinations.”

The cost of living in general is contributing to the population growth in the South, with states like Massachusetts and California among the most expensive, with average costs in 2024 exceeding $50,000 per year, with New York and New Jersey close behind at over $49,000, according to Forbes. Comparably, southern states like the Carolinas, Texas, Tennessee and Georgia all measure average costs of living below $40,000 per year.

“Amidst the pandemic (and more recently, the explosion in crime rates), many individuals are seeking refuge from congested urban regions by relocating to states with lower population densities,” Earle told the DCNF. “The trend of remote work has gained momentum due to the pandemic. This newfound flexibility has enabled many individuals to move to states with more affordable living costs and lifestyles without changing their employment.”

The South, along with some western states, also employed significantly less harsh restrictions on individuals and businesses during the COVID-19 pandemic, leading to a more economically prosperous environment and quicker economic recoveries, according to Politico.

“The misguided public policy of government-imposed lockdowns also made life unbearable for many people in more left-wing states, which also tended to be states with high taxes and more burdensome regulation,” Antoni told the DCNF.

 

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