Earlier last month, the IRS released the 2019 migration data for adjusted gross income (AGI) that showed a departure in the billions of dollars of taxable income from New York, California, and Illinois. These three states experienced the most outflow of AGI in 2019, while Florida, Texas, and Arizona gained the most AGI. The IRS included a breakdown of this migration by age group:
The IRS migration data reveals that older citizens are moving the most taxable income by billions of dollars. In fact, Boomers moved $12.3 billion from California, Illinois, and New York, while Millennials moved $7.7 billion. They are fleeing California and Illinois, heading over to states like Florida and Arizona. Florida and Arizona received the greatest inflow of AGI in the 55 to 65 age group, followed by the 65 and over age group, while California and Illinois experienced the greatest outflow of AGI in these same groups. Those in or near retirement have discovered fairer fields. Moreover, since businesses are often owned by persons in this demographic, most likely not just retirees are leaving, but business owners as well.
In New York, Millennials are apparently no longer satisfied with the status quo. New York saw a departure of $1.8 billion from just the 26 to 35 age group, which was 20.3 percent of total migration of AGI from the state. Altogether, New York lost almost $9 billion in taxable income in 2019. Texas gained the most taxable income from the 35 to 45 range, followed by the 45 to 55 range, for a total of $2.2 billion. For the most part, those in this age range have already established their careers.
The IRS data on the migration of tax returns further clarifies the matter:
For Texas, Florida, and Arizona, increases in AGI and number of tax returns showed fairly consistent trends with one important distinction: for Texas there was a greater inflow of returns in the 26 to 45 range relative to the AGI for the same range. For New York and Illinois, the opposite was true. There was a greater outflow of returns in the 26 to 35 range relative to AGI. Taxpayers in younger age demographics may have less money, but they are still leaving.
Major cities such as New York City, Chicago, L.A, and San Francisco have been considered beacons of opportunity for generations. Whether for high starting salaries, availability of jobs, or dynamic social and culture scenes, younger generations have flocked to New York, Illinois, and California. That seems to be changing.
The IRS migration data for AGI and returns reveals that Illinois, California, and New York have become less desirable across the board. Taxes may have something to do with this, since those three states all have much higher Taxpayer Burdens than the destination states:
The Taxpayer Burden is the amount of money each taxpayer of these states would have to pay to address the total liabilities of their respective governments. The IRS data suggests that taxpayers will most likely leave before taxes are raised to cover the accumulated liabilities.
Another study shows the tax burden percentage:
The tax burden percentage is the proportion of personal income which is taken in state and local taxes for a family of three with an income level of $75,000. In 2019 for Illinois this percentage was 12.2. New York was at 11.4 and California was at 10.9. Arizona, Texas, and Florida were all lower, at 9.1, 6.8, and 6 percent respectively. The states with the highest losses also have the highest tax burden percentage.
States once seen as great places of economic opportunity are losing taxpayers seeking a more fertile economic situation. Unless those states change course these trends will most likely continue.
Joshua Terry is a data research intern at Truth in Accounting.