People moving to low tax states!

The High-Tax Wealth Flight Continues

IRS data show that taxpayers keep fleeing rapacious states even after the pandemic.

The Editorial Board, WSJ

March 28, 2026

As Democrats across the country seek to raise income taxes, the IRS on Friday released new data on state income migration that is a reality check on their ambitions. Even after the pandemic, high-tax states continue to lose tens of billions of dollars in taxable income to low-tax states.

The latest IRS data includes the adjusted gross income (AGI) of tax filers who moved between and within states between 2022 and 2023. Not surprisingly, overall migration ebbed from record highs in 2020 and 2021 during the Covid lockdowns. A mortgage lock-in effect and rising interest rates also resulted in fewer people moving.

Yet states with the highest taxes continue to lose the most income to other states. California lost on net $11.9 billion, mostly to Texas, Nevada and Arizona. Other big losers include New York ($9.9 billion), Illinois ($6 billion), Massachusetts ($4 billion), New Jersey ($2.6 billion), Maryland ($1.8 billion) and Minnesota ($1.5 billion). (See the nearby chart.)

These states impose hefty progressive income taxes that wallop high earners, businesses and the upper middle class. While the top state-and-local rate in New York City is 14.8%, individuals who make over $215,400 pay a punishing 10.7%. Minnesota’s 9.85% top rate, which hits at $203,151, is the highest in the Midwest. It also imposes a 1% tax on investment income exceeding $1 million.

Millionaires in California pay a top rate of 13.3%, but the state’s 9.3% bracket begins at $72,724. Illinois imposes a relatively low and flat 4.95% income tax rate, at least for now—public unions keep trying to replace it with a graduated structure—but its corporate and property taxes are among the highest in the country.

By comparison, all states without an income tax besides Alaska gained income from interstate migration, including Florida ($20.6 billion), Texas ($5.5 billion), Tennessee ($2.8 billion) and Nevada ($1.5 billion). Other big AGI gainers include South Carolina ($4.1 billion), North Carolina ($3.9 billion) and Arizona ($2.8 billion).

Sunshine isn’t the only draw since zero-income tax New Hampshire, Wyoming and South Dakota also gained income, largely from higher-tax neighbors. New Hampshire gained nearly $900 million from Massachusetts, which in 2022 enacted a 4% tax surcharge on millionaires. That raised the Bay State’s top rate to 9%.

While out-migration declined from pandemic levels for most states, not so in Massachusetts. Taxpayers making more than $200,000 accounted for 70% of the state’s net outflows, roughly double the share in 2019. This is notable since progressives claim Massachusetts shows that raising taxes doesn’t drive away top earners.

They say income tax revenue paid by Massachusetts’s highest earners has surged. That’s because a buoyant stock market lifted capital gains. The Congressional Budget Office reports that non-withheld income and payroll tax payments for the first five months of this fiscal year were up 30% compared to last year.

Most states have had strong revenue growth since the pandemic thanks to wage growth, fizzy markets, rising home values and resilient consumer spending. But states that disproportionately rely on their wealthy to pay their budget bills will be in a world of hurt when there’s a market correction or recession.

Spending in most high-tax states is also growing faster than revenue, resulting in budget shortfalls and progressive calls to raise taxes even more. This tax-and-spending ratchet drives away high earners who create jobs. Most high-tax states are losing jobs outside of government, healthcare and social assistance.

A cautionary tale is Washington state, which before the pandemic had no income tax and ranked as one of the country’s biggest income gainers. In 2021 Democrats imposed a 7% tax on capital gains exceeding $250,000. What do you know? The state lost about $250 million in income on net in 2023, mostly to Texas, Florida and Arizona.

Washington still gained income from higher tax neighbors Oregon and California, but that may not continue since Democrats in the Evergreen State enacted a raft of hikes including on estates and business gross receipts. This month Democrats passed a 9.9% tax on income over $1 million, matching Oregon’s top rate (which hits at $125,000).

People move for reasons besides taxes, but taxes influence the economic climate and opportunity. Government unions that rule high-tax states also work to undermine the quality of public education and other services, while ballooning welfare states squeeze spending on public safety.

When partisan gerrymanders and public-union machines entrench one-party Democratic governance, people who can’t affect political change at the ballot box vote with their feet. And they are taking their wallets and mutual funds with them.

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