NY, Cali. biggest losers as wealthy fled to low-tax states: IRS

The coronavirus pandemic triggered a “wealth migration” which saw high-tax states like New York and California lose high-income earners to low-tax locales such as Texas, Florida, and Arizona, according to data from the Internal Revenue Service.

New York’s tax base shrank by $19.5 billion while California lost $17.8 billion as a result of workers fleeing those states during a time when lockdown measures allowed employees to work remotely, according to the Wall Street Journal.

Other high-tax jurisdictions such as Illinois ($8.5 billion); Massachusetts ($2.6 billion); New Jersey ($2.3 billion); and Maryland ($1.9 billion) also saw an exodus of workers during 2020.

The states that prepared the benefits of the “wealth migration” include Florida, which gained an additional $23.7 billion in gross income; Texas, which gained $6.3 billion; Arizona, which took in $4.8 billion more; North Carolina ($3.8 billion); South Carolina ($3.6 billion); and Tennessee ($2.6 billion).

Four of the top 10 states that gained the most income in 2020 do not have a state income tax, according to the Journal. The other states on that list — Idaho, Utah, Wyoming, Colorado, Montana, and South Carolina — are known to have low tax burdens.

New York State also saw an exodus of wealth during the pandemic, according to IRS data.
New York State also saw an exodus of wealth during the pandemic, according to IRS data.
Christopher Sadowski

According to the Journal, the migration away from high-tax states was expedited by the 2017 tax reform signed into law by then-President Donald Trump which placed a cap on how much taxpayers could deduct state and local taxes (SALT) from their federal filings .

Prominent Democrats have urged the Biden administration to lift the $10,000 SALT cap — a move which would benefit filers from high-tax states who can write off the significant amounts of property taxes that they pay every year.

California’s tax base has gotten progressively smaller in the years leading up to the pandemic, according to the Journal.

The Golden State lost $8 billion in income in 2018 and $8.8 billion the next year, according to IRS data cited by the Journal.

But the state still seems to be faring quite well financially. Last year, California took in more than $179 billion in tax revenues, which is $35 billion more than the previous year, according to CalMatters.

The state, which boasts a progressive tax structure that imposes bigger levies on higher earners, was flush with cash as tech millionaires and billionaires raked in record profits during the pandemic.

Florida has been one of the beneficiaries of the wealth migration, according to IRS data.
Florida has been one of the beneficiaries of the wealth migration, according to IRS data.
EPA

Democrats in the California state legislature said earlier this year that the budget surplus more than doubled since January to a staggering $68 billion — this despite the fact that Gov. Gavin Newsom warned there would be $54 billion deficit as a result of the pandemic.

Last year, California’s budget included a $47 billion surplus, which was a record at the time.

The latest estimate — based on preliminary numbers from the nonpartisan Legislative Analyst’s Office — confirms California is on track to blow by that number this year.

New York State also took in more in tax revenue over the last year after raising taxes on its wealthiest residents.

Albany collected $38.8 billion more over the past 12 months compared to previous fiscal year, according to Comptroller Tom DiNapoli’s office.

By the end of fiscal year ending April 1, New York State collected $121.1 billion — which is $30 billion higher than initially expected by state budget officials last year.

New York Gov. Kathy Hochul and the Democrat-led state legislature came to an agreement earlier this year on a $220 billion budget which included increased spending on schools and health care.

Nevertheless, New York’s population has remained stagnant as residents pack up and head for warmer regions.

Texas also saw an influx of wealth during the coronavirus pandemic, according to IRS data.
Texas also saw an influx of wealth during the coronavirus pandemic, according to IRS data.
Getty Images

New data showed that migration from the Empire State to Florida has accelerated this year.

A total of 21,546 New Yorkers swapped their driver’s licenses for the Sunshine State version during the first four months of this year — a 12% increase from the same period in 2021.

The 2022 totals are 55% higher than the first four months of the last pre-pandemic year of 2019.

With Post wires

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