After our big win this past Sunday, Chiefs mania has clearly taken over the city. One last minute addition who I think could end up playing a huge role in us bringing home the Vince Lombardi trophy this year is LeSean McCoy. After being released from the Buffalo Bills last week the all-pro running back was also in negotiations with the Los Angeles Chargers before signing with the Chiefs.

His response to why he chose to sign with Kansas City was an interesting one. He said it was primarily due to the central location of KC and the lower taxes. That comment took me a bit by surprise, but after looking at various tax tables in California, I have to admit it made a lot sense. Had he signed with the Chargers he would have paid a 13.3% state income tax rate on his 4 million dollar contract compared to just around 5% here. That alone is a savings of over $300,000! When you then factor in both LA’s high local taxes, and cost of living, his decision becomes quite reasonable.

His comments reflect a growing migration trend away from high tax areas like California and New Jersey to lower tax states like Texas and Florida. According to a recent study by Edelman Intelligence, 53% of Californians are considering leaving the state. The primary factors in this relocation, according to the survey respondents, were cost of living and tax rates.

Part of the reason state and local taxes are playing a bigger role in determining where people choose to live and work is a result of changes in the US tax laws. In 2018 after President Trump signed into law the Tax Cuts and Jobs Act, state and local tax deductions became capped at $10,000. While most people in the Midwest were unaffected, wealthier individuals in high tax states saw a significant increase to their federal tax liabilities.

It doesn’t require moving cross-country to save money on your taxes however. Even locally, where you choose to live or work can dramatically impact the amount of taxes you have to pay. For example, when my wife and I were in the market for a new home a couple of years ago we made it a point to try and find a home outside of the KC city limits. In doing so, we would avoid the 1% earnings tax applied to most people in the area because neither my wife, nor I, work in Kansas City. We also looked to avoid paying higher Jackson County property and sales tax rates by living in the northland. It may not seem like much, but over a lifetime these cost savings can really add up.

This is part of the reason I believe we in the Midwest could experience exponential growth in this highly competitive and ever-changing economic landscape. As technology makes it easier and easier to work outside of large metropolitan areas, I believe this trend of people moving away from high tax areas will only increase. This should provide a lot of economic opportunities that used to only be available to people living on the coasts. That’s why, in my opinion, it’s imperative that our local municipalities and states, do everything they can to keep taxes and overall cost of living low. If they don’t, more and more people may choose to leave for places that do.