WILFORD: New IRS Numbers Are In And They Look Bad For Gavin Newsom, Kathy Hochul And J.B. Pritzker

Justin Sullivan/Getty Images

Andrew Wilford Contributor
Font Size:

The pandemic brought with it a great deal of changes. In many cases, this included changes in scenery. Newly released IRS data shows that in the first year of the pandemic, taxpayers fled high-tax states like New York and California for low-tax states like Florida and Texas at an even faster rate than before.

The IRS annually releases data on what states taxpayers moved to and from. This data is delayed a few years, so the most recent release describes where taxpayers moved to over the course of the first year of the pandemic, in 2020. 

It’s not a new phenomenon that New York and California have been hemorrhaging taxpayers. The previous set of data, describing taxpayers’ moves in 2019, found that these two states combined to lose over 248,000 households and $37 billion in adjusted gross income (AGI) on net (moves out after subtracting moves in). 

But that went into overdrive in 2020, as millions of Americans found themselves no longer expected — or able — to commute. In 2020, New York and California combined to lose over 300,000 households and $53 billion in AGI on net. 

While not on the same scale as New York and California, the other big losers from tax migration were exactly the states one might expect: Illinois, Massachusetts, and New Jersey. In total, the ten biggest tax migration losers lost over 430,000 households and $81.7 billion in AGI on net.

But one state’s loss is another state’s gain — and in this case, that “other state” is Florida. Florida gained over $39 billion in AGI on net during 2020, more than the next nine biggest “winner” states combined. Texas was the next biggest “winner,” gaining just under $11 billion in AGI on net.

A clear theme among these winners and losers is that taxpayers fled to greener tax pastures in 2020. The ten biggest tax migration “losers” had an average of the 39th most taxpayer-friendly tax system, according to the Tax Foundation’s State-Local Tax Burden rankings. The ten biggest “winners,” on the other hand, averaged the 16th-most taxpayer-friendly tax system.

Again using the Tax Foundation’s ranks, we can use the IRS’s data to see how many moves in 2020 were tax-advantageous. Filtering out lateral moves to a state with a roughly similar tax burden, more than 60 percent of “tax-significant” moves in 2020 went to a better tax system. At the same time, more than 70 percent of AGI involved in these “tax-significant” moves went to a more taxpayer-friendly state.

Considering the multitude of reasons why Americans move, from work to family to weather, that’s a very significant majority. Clearly, taxes are not just one more consideration in Americans’ residency decisions — they are often the primary one.

The obvious solution for these states that continue to see their residents fleeing for lower-tax alternatives would be to restructure their tax systems to be more competitive and less confiscatory. But as that is a lesson that these states refuse to learn, taxpayers need to be aware of their preferred solution — coming up with excuses to reach across their borders to tax Americans in other states.

It’s great news that taxpayers are voting with their feet at greater rates than ever before, and that the increasingly digitized economy is making this possible. But real change won’t happen in the states taxpayers are fleeing unless those states have no alternative but to fix their tax systems.

Andrew Wilford is a senior policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax and fiscal policy research and education at all levels of government.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.