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New York and California lost more than $90 billion in income during Covid as taxpayers moved to other states, accelerating a trend of higher-income earners moving to lower-tax areas.
New data from the Internal Revenue Service shows that New York state lost $25 billion in adjusted gross income due to outmigration in 2021, on top of losing $20 billion in 2020. California posted a net loss of $29 billion in 2021, after A loss of $18. $1 billion in 2020. Together, the two countries lost $92 billion over the two years.
Data shows that the flight of income from high-tax states to low-tax states, which has been occurring for years, gained momentum during Covid. Income losses in California and New York in 2021 were more than three times that combined Losses in 2019, before the pandemic hit the US
Experts say that while income migration from states likely slowed in 2022 and 2023 from pandemic spikes, high-tax states will continue to see an outflow from high earners, thanks in part to remote work and growth in low-income jobs. White collar in the sun belt.
“When we get the data for 2021-22 and 2023, the outflow has certainly slowed somewhat,” said EJ McMahon, founding fellow at the Empire Center, “which doesn’t mean in my opinion immigration will stop being an issue.”
Florida was the biggest gainer in immigration: The Sunshine State netted 128,000 households in 2021, bringing in more than $39 billion in income, according to IRS data, a huge jump from the $28 billion the state gained in 2020. Palm Beach County, which includes the exclusive town of Palm Beach, earned more than $11 billion in income alone in 2021, according to the IRS.
Almost a third of Florida’s winnings – or about $10 billion – came from New York. California, Illinois and New Jersey each lost more than $4 billion in income to Florida in 2021. The income gains are rippling through the Florida economy, with a recent Bureau of Labor Statistics report showing that Florida has more total jobs than New York since the bureau began tracking the numbers in 1982. .
Texas was also the winner, adding $11 billion in income. California’s loss was largely Texas’ gain, with more than $5 billion going from California to Texas.
Other winners included Nevada, North Carolina and Arizona, which had a combined income of $14 billion.
Losses in higher-tax states also tend to be higher-income, which will have a significant impact on tax collection over time. The median income of families who left New York reached an all-time high of $130,000 in 2021. The median income of New Yorkers who moved to Florida was even higher, at $223,245 — a 64% jump from the average Income of those who moved between 2019 and 2020, according to McMahon.
A number of ultra-high earners, such as hedge fund executives and private equity heads, have also moved to Florida during the pandemic. These groups tend to be among the largest individual taxpayers in New York, New Jersey, and Connecticut.
Many Democrats say the income flight is exaggerated, because the number of millionaires in New York and California is still at or near all-time highs. They say that as federal aid decreases and tax revenues start to decline, states should raise taxes on the wealthy.
New York lawmakers fought last month to raise taxes on New Yorkers who earn more than $5 million a year, but Gov. Kathy Hochul blocked the move.
California and New York, which had budget surpluses in 2022, are now projecting deficits in 2023 and 2024. California projects a deficit of $24 billion in the next fiscal year. New York projects a deficit of more than $7 billion by 2025.
“If we’re seeing an influx of high-income earners – and we are – then it definitely means that the tax base is smaller than it would otherwise be,” McMahon said.
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