NY, Calif., other high-taxed states losing billions while Fla. prospers from mass migration

A new analysis of Internal Revenue Service data shows a continued shift of income and residents from high-tax states to lower-tax states, with Florida emerging as the biggest financial beneficiary of that migration.

Between 2022 and 2023, people relocating to Florida brought with them about $20.6 billion in annual adjusted gross income, according to IRS figures. The movement of taxpayers has translated into significant financial losses for several high-tax states, particularly New York and California.

California experienced the largest drop, with a net loss of $11.9 billion in income tied to residents who moved out during that period. An examination of the IRS data by The Wall Street Journal found that many Californians headed to states such as Texas, Nevada, and Arizona, where living costs and taxes are generally lower.

New York followed with a net income loss of $9.9 billion. Other states also seeing large declines included Illinois, which lost $6 billion; Massachusetts at $4 billion; New Jersey at $2.6 billion; Maryland at $1.8 billion; and Minnesota at $1.5 billion.

Economists say the pattern reflects a growing focus on affordability. Joel Berner, a senior economist at Realtor.com, said many people are relocating to areas where housing costs are lower and supply is expanding.

“The states that saw the largest gains in wealth from people moving in are the ones working hardest to increase housing supply and reduce prices,” Berner said.

Critics of the policies in some high-tax states argue that heavy tax burdens on high earners and large government spending have contributed to the exodus. They say repeated calls for higher taxes risk pushing more residents and businesses elsewhere.

In New York City, individuals earning more than $215,400 face a city income tax rate of 10.7 percent, while the combined state and local top rate reaches 14.8 percent.

New York City Mayor Zohran Mamdani has proposed adding another 2 percent income tax surcharge on millionaires and is urging Governor Kathy Hochul and lawmakers in Albany to consider the plan.

Bruce Blakeman, the Nassau County executive and a Republican candidate for governor, said policies under Hochul have played a role in the state’s population losses since 2020.

He pointed to high taxes, rising utility costs, increasing insurance rates, and the possibility of an inheritance tax as factors pushing residents and employers to leave the state.

California also maintains some of the highest tax rates in the country. Its top income tax rate reaches 13.3 percent, while the 9.3 percent bracket begins at $72,724 in income.

Minnesota’s highest income tax rate is 9.85 percent and begins at $203,151, the highest top rate in the Midwest. The state also levies an additional 1 percent tax on investment income exceeding $1 million.

In contrast, several states that do not impose a state income tax saw large increases in incoming income tied to migration. Florida’s $20.6 billion gain was the largest, followed by Texas with $5.5 billion, South Carolina with $4.1 billion, and North Carolina with $3.9 billion.

Other states benefiting from the movement included Tennessee and Arizona, each gaining about $2.8 billion, and Nevada with roughly $1.5 billion.

New Hampshire also gained nearly $900 million from residents relocating from neighboring Massachusetts. Massachusetts voters approved a 4 percent tax surcharge on millionaires in 2022, raising the top tax rate in that state to 9 percent.

Doug Kellogg, state projects director for Americans for Tax Reform, said high-tax states are losing residents partly because people believe they pay more without seeing better services in return.

He argued that states with lower tax burdens have become more attractive destinations for both individuals and businesses.

Kellogg also pointed out that the economic balance between regions has shifted. Southeastern states have surpassed the Northeast in total gross domestic product in recent years, he said, and many of the most popular destinations for movers are governed by Republicans with significantly lower average income tax rates than the states experiencing the largest losses.