New IRS data compiled by research outfit Wirepoints illustrate the flight from high- to low-tax states. The chart above shows the adjusted gross income (AGI) that states lost or gained from population migration in 2019 as a share of their total AGI. States in the Sun Belt and Mountain West generally gained income while those in the Northeast and Midwest lost income.
Retirees in the Midwest and Northeast are flocking to sunnier climes. But notably, states with no income tax (Florida, Nevada, Tennessee and Wyoming) made up four of the 10 states with the largest income gains. On the other hand, five of the 10 states with the greatest income losses (NY, Connecticut, New Jersey, Minnesota, California) ranked among the top 10 states with the highest top marginal income tax rates.
The chart above shows how much AGI states gained and lost in billions of dollars. Florida gained a whopping $17.7 billion in AGI including $3.4 billion from New York, $1.2 billion from California, $1.9 billion from Illinois, $1.7 billion from New Jersey and $1 billion from Connecticut. California, on the other hand, lost $8.8 billion including $1.6 billion to Texas, $1.5 billion to Nevada, $1.2 billion to Arizona and $700 million to Washington.
Taxpayers who moved from high-tax states to Florida had significantly higher AGIs. For instance, Illinois migrants to Florida had an average AGI of $182,000—about twice as much as those who moved from Illinois to other states. The average taxpayer who moved to Florida from the other 49 states had an AGI of $110,000, which is about twice the average household income. By contrast, the average taxpayer who left Florida had an AGI of just $66,000.
In sum, high-tax states aren’t just losing more taxpayers—they are losing higher-income ones. Similarly, low and no income states are generally gaining more taxpayers who also earn more.
The chart above shows per-capita state and local tax collections, according to the Tax Foundation. States like New York and California collect more in part because they impose steeply progressive income taxes that soak the rich. When blue states lose high earners, their tax base shrinks, but their cost base continues to grow due to rich government employee pay, pensions and other benefits.
The result is that middle class taxpayers in blue states also wind up paying significantly higher taxes than those in other states. Middle-income households in California pay the highest income taxes—its 9.3% marginal rate hits at $58,365—in the country. Connecticut in 2019 extended its sales tax to various services including digital streaming as tax revenues fell short of expectations.
On the other hand, Florida, Nevada and Tennessee have been able to maintain their zero-income tax in part because of strong population migration. People moving from other states buy homes and other things, which generate tax revenues, and higher-income migrants consume more.
The result is that low-tax states are getting richer while those that impose higher taxes are getting poorer.
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