New IRS data compiled by research agency Wirepoints illustrates the flight from high-tax states to low-tax states. The chart above shows the Adjusted Gross Income (AGI) that states lost or earned due to population migration in 2019 as a share of their total AGI. The Sun Belt and Mountain West states have generally gained income while those in the Northeast and Midwest have lost income.
Retirees from the Midwest and Northeast are flocking to sunnier climates. But notably, the states without income tax (Florida, Nevada, Tennessee and Wyoming) accounted for four of the 10 states with the largest income gains. On the other hand, five of the 10 states with the largest income losses (NY, Connecticut, New Jersey, Minnesota, California) ranked among the top 10 states with the highest marginal income tax rates. high.
The graph above shows how much the AGI states have gained and lost in billions of dollars. Florida earned $ 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, meanwhile, lost $ 8.8 billion, including $ 1.6 billion in Texas, $ 1.5 billion in Nevada, $ 1.2 billion in Arizona and $ 700 million in Washington.
Taxpayers who moved from high-tax states to Florida had significantly higher AGIs. For example, migrants from Illinois to Florida had an average AGI of $ 182,000, about double that of those who left Illinois for other states. The average taxpayer who moved to Florida from the other 49 states had an AGI of $ 110,000, about double the average household income. In contrast, the average taxpayer who left Florida had an AGI of only $ 66,000.
In short, high tax states are not only losing more taxpayers, they are losing those with higher incomes. Likewise, low-income and no-income states typically earn more from taxpayers who also earn more.
The graph above shows local and national tax collections per capita, according to the Tax Foundation. States like New York and California collect more in part because they impose very progressive income taxes that absorb the rich. When blue states lose high incomes, their tax base shrinks, but their cost base continues to grow due to rich government employee salaries, pensions, and other benefits.
The result is that middle-class taxpayers in the blue states also end 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 reaches $ 58,365) in the country. In 2019, Connecticut 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 taxes in part thanks to high population migration. People from other states buy houses and other things, which generates tax revenue, and high-income migrants consume more.
The result is that low-tax states get richer while those that impose higher taxes get poorer.
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