Budget & Tax

How money walks: Alaska

January 4, 2019

Curtis Shelton

Note: This is part of an ongoing series about how states attract income—actually, people who earn income—from other states. Data are from How Money Walks, a project that tracks income migration at the state and county levels. Using IRS data, it shows how states have gained or lost wealth between 1992 and 2016. These data provide evidence about the effects of tax policy on where people choose to live. Other states in our series include Nevada, Washington, Texas, and Florida.

Alaska is the first state we have looked at that has lost wealth over the 24-year period. Alaska has seen $3.06 billion of annual adjusted gross income move out of the state from 1992 to 2016. Like most of the other states we’ve looked at, Alaska has gained the most wealth from California, the state with the highest income tax rate in the country, with $40.08 million moving from California to Alaska.

Alaska has a wide variance in its rankings on economic competitiveness. It ranks 2nd in the Tax Foundation’s State Business Tax Climate Index, and 34th in Rich States, Poor States. The reason for such a large difference is that the State Business Tax Climate Index is based on tax rates and structure, while Rich States, Poor States includes other factors, such as state debt. As Alaska has the highest debt burden in the country, its ranking is weighed down accordingly.

Alaska’s tax burden as a share of income is almost two percentage points lower than Oklahoma’s, despite the higher per capita tax collections. This is because Alaska has one of the highest median household incomes in the country. Much of Alaska’s wealth comes from the oil industry, one of the riskier occupations to work in. That, plus severe weather and a remote location, helps explain the higher median incomes. It takes higher pay to get people to work these jobs. As anyone who has seen Alaska: The Last Frontier or Deadliest Catch knows, this sort of lifestyle is not for everyone.

But even with these challenges, Alaska has only seen a modest loss of wealth compared to other states in the lower 48 such as Illinois, New York, and California, which have each lost over $50 billion in wealth.