NY, Cali. the biggest losers as the wealthy fled to low-tax states: IRS
The coronavirus pandemic has sparked a “wealth migration” that has seen high-tax states like New York and California lose high-income earners to low-tax regions like Texas, Florida and California. 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 workers fled from those states at 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 in 2020.
States that have reaped the benefits of “wealth migration” include Florida, which gained an additional $23.7 billion in gross revenue; Texas, which won $6.3 billion; Arizona, which took in an additional $4.8 billion; North Carolina ($3.8 billion); South Carolina ($3.6 billion); and Tennessee ($2.6 billion).
Four of the top 10 earning states in 2020 have no state income tax, according to the Journal. The other states on this list — Idaho, Utah, Wyoming, Colorado, Montana, and South Carolina — are known to have low tax burdens.
According to the Journal, migration from high-tax states was accelerated by the 2017 tax reform enacted by then-President Donald Trump, which capped the amount taxpayers could deduct from state and local taxes (SALT) on their federal returns. .
Prominent Democrats have urged the Biden administration to lift the $10,000 SALT cap — a move that would benefit filers in high-tax states that can waive the large amounts of property taxes they pay each year.
According to the Journal, California’s tax base gradually shrank in the years leading up to the pandemic.
The Golden State lost $8 billion in revenue in 2018 and $8.8 billion the following year, according to IRS data cited by the Journal.
But the state still seems to be doing quite well financially. California took in more than $179 billion in tax revenue last year, up $35 billion from the year before, according to CalMatters.
The state, which benefits from a progressive tax structure that imposes higher levies on high earners, was teeming with cash as tech millionaires and billionaires raked in record profits during the pandemic.
Democrats in the California state legislature said earlier this year that the budget surplus had more than doubled since January to $68 billion, despite Governor Gavin Newsom warning there would be a $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 Office of the Nonpartisan Legislative Analyst — confirms that California is on track to surpass that figure this year.
New York state also collected more tax revenue in the past year after raising taxes on its wealthiest residents.
Albany has raised $38.8 billion more in the past 12 months than the previous fiscal year, according to Comptroller Tom DiNapoli’s office.
By the end of the fiscal year ending April 1, New York State had raised $121.1 billion, or $30 billion more than originally forecast by state budget officials. last year.
New York Governor Kathy Hochul and the Democratic-led state legislature reached an agreement earlier this year on a $220 billion budget, which included increased spending on schools and health care health.
Nonetheless, New York’s population has remained stagnant as locals pack up and head to warmer regions.
New data has shown the Empire State’s migration to Florida has accelerated this year.
A total of 21,546 New Yorkers exchanged their driver’s license for the Sunshine State version in 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