Taxpayers Fleeing Blue States Take $26.8 Billion in Gross Income to Red States

 

By Tom Ozimek   June 8, 2021 Updated: June 8, 2021

IRS data tracking state-to-state migration shows that blue states saw a net outflow of hundreds of thousands of taxpayers who took nearly $27 billion in taxable gross income with them to red states.

The most recent IRS migration data shows that in the years 2017-2018, a net 399,892 taxpayers and their dependents left blue states—in this case defined as those in which both the state House and Senate are Democrat-controlled.

The figures are based on 2018-2019 tax returns and exemptions, reflecting 2017-2018 state-to-state flows of people. The IRS considers tax returns a proxy for households, while exemptions are a good approximation for the number of individual taxpayers and their dependents.

The nearly 400,000 taxpayers and dependents—a little over .1 percent of the U.S. population—who left blue states took with them a net $26.8 billion in taxable adjusted gross income to red states.

Democrat-controlled California (167,563), New York (153,970), and Illinois (82,107) accounted for the bulk of the exodus, followed by New Jersey (26,853), Massachusetts (26,086), and Maryland (15,916).

The top beneficiary of the blue state outflow was GOP-controlled Texas, which saw a net inflow of 114,818 taxpayers and their dependents, along with a gross income boost of nearly $4 billion.

Interstate migration flows are influenced by a number of factors, including crime rates, job opportunities, and housing costs. A routine Census Bureau survey asks people who move any distance the main reason for their decision to relocate, including employment, housing, going away for college, crime, or to join a significant other.

The most popular choices in 2019-2020 ranked according to popularity, were “wanted newer/better/larger house or apartment,” followed by “new job or job transfer,” “to establish own household,” “other family reason,” “wanted to own home, not rent,” and “wanted cheaper housing.”

The least popular responses were “natural disaster,” “change of climate,” and “foreclosure or eviction,” with “wanted better neighborhood/less crime” somewhere in the middle.

While taxes are not part of the Census Bureau survey, a 2018 analysis by the Cato Institute, a libertarian think tank, argued that taxes do influence migration, and said tax-related motivations could be inferred from some of the Census Bureau survey’s responses.

“The Census Bureau does not ask movers about taxes. But some of the 19 choices may reflect the influence of taxes,” the institute wrote in the analysis. “For example, people moving for housing reasons may consider the level of property taxes since those taxes are a standard item listed on housing sale notices. Similarly, people moving for new jobs may consider the effect of income taxes if they are, for example, moving between a high-tax state such as California and a state with no income tax such as Nevada.”

Nevada was one of seven blue states that saw a net influx of people, welcoming 31,238 taxpayers and their dependents, along with just over $2 billion in gross income. Most of the people relocating to Nevada came from California.

According to the Tax Foundation’s state-local tax burden analysis, blue states generally have a higher state-local effective tax rate compared to red states.

A recent Rasmussen Poll showed that a majority (55 percent) of likely voters nationwide prefer a smaller government with fewer services and lower taxes.

Follow Tom on Twitter: @OZImekTOM

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