Where a person or business chooses to put down roots can have a significant impact on their costs, and in recent years, more people are moving to locations that will keep costs low.

Expensive states that have been major economic powers and population centers in the past, like California and New York, are seeing their population growth level out and more industries leave their state for inexpensive locations. Tech companies like Tesla, Oracle, and Hewlett Packard have recently announced plans to relocate operations outside of California, while banks and investment firms have moved more of their operations out of the New York metro in favor of locations in Florida. With the increased flexibility of remote work since the pandemic began, many households have also made the decision to move to lower-cost areas.

Key to many of these decisions is the effect of state and local tax rates. While federal income taxes are often the first to come to peoples’ minds when thinking about taxation, states and localities vary widely in how they levy taxes on businesses and individuals. For example, nine states—including the aforementioned destination states of Texas and Florida—charge no individual state income tax, while five states have no sales taxes. Other states may distinguish themselves with low corporate or property tax rates.

Despite this trend, not all taxpayers have the means to seek out locations with the lowest taxes. In fact, most low-income households are stuck paying higher effective tax rates when factoring in income, sales, automotive, and property taxes (including the property tax equivalent of rent). A typical family earning less than $25,000 will pay around $2,904 in state and local taxes each year, or 11.6%. Meanwhile, a family earning $150,000 pays nearly five times as much in total taxes—$14,173—but has a lower effective tax rate of 9.4%.