Are Dem states losing residents and tax base?
Updated: Apr 30
The Blue State Exodus Accelerates
New IRS data for 2021 shows voters fleeing Illinois, among others.
By The Editorial Board, WSJ
April 28, 2023 6:59 pm ET
Illinois Gov. J.B. Pritzker shrugged last year after several high-profile corporations left his state. “Countless companies are choosing Illinois as their home,” Mr. Pritzker said. Then why does a new Internal Revenue Service report show an accelerating taxpayer exodus from Illinois and other high-tax states?
The IRS each spring publishes data on the movement of adjusted gross income (AGI) and taxpayers across state lines from year to year. Some Democratic Governors such as Mr. Pritzker claimed that the 2020 Census undercounted their state populations, but the IRS data shows blue states are losing taxpayers and income at an increasing clip. (See the nearby charts.)
The IRS data shows a net 105,000 people left Illinois in 2021, taking with them some $10.9 billion in AGI. That’s up from $8.5 billion in 2020 and $6 billion in 2019. New York’s income loss increased to $24.5 billion in 2021 from $19.5 billion in 2020 and $9 billion in 2019. California lost $29.1 billion in 2021, more than triple what it did in 2019.
By contrast, the lowest tax states added some $100 billion of income during the pandemic. Zero-income-tax Florida gained $39.2 billion—up from $23.7 billion in 2020 and $17.7 billion in 2019. About $9.8 billion of the total arrived from New York, $3.9 billion from Illinois, $3.7 billion from New Jersey and $3.5 billion from California.
Texas was another winner, attracting a net $10.9 billion in 2021, which follows a gain of $6.3 billion in 2020 and $4 billion in 2019. Californians represented more than half of Texas’s income gain in 2021. The Golden State also sent $4.4 billion to Nevada, $2.7 billion to Arizona and $2 billion to Washington. Nevada and Washington don’t tax wages, and Arizona is phasing out its income tax.
Illinois lost income to all of its neighboring states, but the biggest beneficiaries of its taxpayer flight were Florida, Texas, Indiana and Wisconsin. Mr. Pritzker can’t blame lousy weather since it’s not exactly balmy in Kenosha. Billionaire Ken Griffin cited Chicago’s out-of-control crime last year as the reason he moved his hedge fund to Miami.
Raising taxes to pay for under-funded public worker pensions and bloated social programs doesn’t help the Land of Lincoln attract talent. The same is true for other blue states. New York Democrats in April 2021 increased the combined state-and-local top income tax rate to 14.8% from 12.7%. It would have been a surprise if taxpayer flight hadn’t increased that year.
A major problem for high-tax states is that their escapees often pay more in taxes than their newcomers. The IRS data shows that the taxpayers leaving Illinois and New York typically made about $30,000 to $40,000 more than those arriving. Of Illinois’s total out-migration, 28% of the leavers made between $100,000 to $200,000 and 23% made $200,000 or more.
By contrast, the average return of a Florida newcomer in 2021 was about $150,000—more than double that of taxpayers who left. High earners spend more, which yields higher sales tax revenue. This helped Florida post a record $22 billion budget surplus last year. California is forecasting a $29.5 billion deficit.
All of this income migration helps explain why Florida and other low-tax states lead the country in job growth. Employment grew 4.5% in Florida and 4.3% in Texas over the past year compared to 2.5% in California and 2.2% in Illinois. In March the unemployment rate was 5.4% in New York City metro region, 5% in Los Angeles, 4.5% in Chicago versus 1.9% in Miami.
Sorry, Mr. Pritzker. The data is clear that Illinois and other states dominated by progressives are losing human talent in droves to better-governed states.