Every year, the IRS releases a report on taxpayer migration. The newest release from May 2022 shows migration patterns between tax years 2019 and 2020. The IRS collects data on the number of personal tax returns filed by taxpayers who migrated in and out of all 50 states and the District of Columbia, as well as the adjusted gross income (AGI) associated with these returns.
Overall, the IRS's tax filer data reflects general migration patterns in the United States. Although there has been widespread discussion about people moving out of urban areas, college towns, and other spaces hit hardest by the COVID pandemic, the reality is that Americans are migrating at historically low rates.
From 2019 to 2020, only 9.2% of Americans moved. The interesting thing is where they're going — the IRS's research on individual income tax returns combined with research from WalletHub strongly suggests that Americans are moving away from high-tax areas and to low-tax areas.
This report summarizes the IRS data migration for 2019 to 2020. It shows where taxpayers are moving to and from, and it also explains where they're taking their tax dollars.
States With the Highest Numbers of Migrating Taxpayers
From 2019 to 2020, Florida, Texas, Arizona, North Carolina, and South Carolina saw the biggest net increase in taxpayers. California, New York, Illinois, Massachusetts, and New Jersey experienced the biggest net decreases in taxpayers.
While there are many reasons to migrate, it's not a coincidence that the top five states with an influx of taxpayers either have no personal income tax or relatively low tax burdens. On the opposite side of the spectrum, four of the five states with the highest outflow of taxpayers rank in the top 10 states with the highest taxes.
Taxpayer Migration as a Percentage of Population
When you look at taxpayer movement as a percentage of state population, the list of states changes a bit, but the migratory trend away from high-tax states and toward low-tax states stays the same. Take a look at the states with the largest proportional net increases and losses in taxpayers.
States With the Largest Proportional Net Taxpayer Increases
Here are the states with the largest net population increases as a percentage of their populations. The number in parentheses shows the state's tax burden compared to other states.
Aside from Maine, all of the states that had a significant increase in net taxpayer population are in the bottom half when ordered by tax burden. And 60% of these states are in the bottom 20% in relation to other states' taxes.
States With the Largest Proportional Net Taxpayer Decreases
These states saw the largest net out migration of taxpayers based on the IRS's taxpayer migration data. Here is their decrease as a percentage of population, followed by their tax burden ranking. Note that D.C. was not ranked, but it is considered to be an area with a high tax burden.
The majority of the states on this list are in the top half for residential tax burden, and 40% are in the top 10 states for taxpayer burden. However, it's important to note that people don't just migrate due to tax rates.
In spite of their low taxes, North Dakota and Alaska experienced significant taxpayer losses. However, Alaska has lost people for nearly a decade due to a recession, and North Dakota is losing taxpayers due to a decline in jobs in the oil industry.
Where Is Taxpayer Money Moving to?
Many taxpayers are taking their incomes to states with lower taxes. According to the IRS, several states with low taxes had twice as much AGI migrate into the state than leave the state from 2019 to 2020.
For example, taxpayers who left Idaho took just $1.368 billion in AGI with them, but the taxpayers who came into the state brought $3.424 billion in AGI. These states experienced the biggest differences between outgoing and incoming AGI:
Again, this list features many states with low taxes. Eight of the states on this list have taxes that are lower than over half of all the other states — notably, Florida and Wyoming don't tax income.
The only two outliers are Maine and Vermont — in spite of their relatively high taxes, these states drew in more AGI than they exported.
Where Is Taxpayer Money Moving Away From?
The states that had the largest decrease between the AGI that migrated out of the state and the AGI that came into the state all have relatively high taxes, except for Alaska and North Dakota. For example, in New York, taxpayers who migrated out of the state took $31.945 billion in AGI with them, and taxpayers who moved into the state only brought in $12.406 billion in AGI.
These states experienced the largest deficits between outgoing and incoming AGI.
Eight of these 10 states are in the top half of states ranked by tax burden. The only outliers are North Dakota and Alaska. However, as discussed in other sections, taxpayers have other reasons for leaving these states like lack of jobs and bitter, painfully cold temperatures.
Are Taxpayers Moving to States With No Income Tax?
Yes. Taxpayers are moving to states with no income tax. Aside from Alaska, all of the states with no income tax experienced a significant increase in taxpayer AGI between 2019 and 2020. In these states, incoming AGI was higher than outgoing AGI by the following rates:
- Florida 134%
- Nevada 74.16%
- New Hampshire 54.65%
- South Dakota 25.79%
- Texas 38.51%
- Washington 13.86%
- Wyoming 99.88%
The AGI that left Alaska was 24.76% higher than the AGI that came into the state. Again, however, the migration out of Alaska has been going on for about nine years, and analysts believe it's linked to a recession in the state's economy. It's also important to note that about a quarter of the people who left Alaska headed to other no-income-tax states.
Are Taxpayers Moving Away From High-Tax States?
According to research by WalletHub, the following 10 states have the highest taxes when you take into account income, sales, and property taxes. In seven of these states, the AGI of taxpayers who moved out of the state was higher than the AGI of taxpayers who migrated into the state at the following rates:
- New York 61.16%
- Hawaii -4.31%
- Maine .84%
- Vermont -64.98%
- Minnesota 25.41%
- New Jersey 18.21%
- Connecticut 4.70%
- Rhode Island -23.65%
- California 45.98%
- Illinois 52.60%
Maine only had a very small decrease between outgoing and incoming AGI, but in the other states, outgoing AGI was between 18 and 61% higher than incoming AGI. These high tax states saw a lot of taxable income leave their borders. However, three high-tax states experienced the opposite trend — surprisingly, tax dollars moved into these states.
High-Tax States That Are Attracting Taxpayers
Only three states with relatively high taxes saw an increase in AGI between the taxpayers who left and the taxpayers who came into the state. They were Hawaii, Vermont, and Rhode Island.
In Hawaii, incoming AGI was 4.3% higher than outgoing AGI. This is a relatively small difference, and in the previous year, incoming AGI was 11% lower than outgoing AGI. The increase is likely due to the fact that many remote workers moved to these beautiful islands during the COVID pandemic.
In Vermont, incoming AGI was 64.98% higher than outgoing AGI. Taxpayers who left took $691 million in AGI, while incoming taxpayers brought $1.14 billion in AGI. This is a stunning difference considering the state only gained about 3,000 taxpayers.
However, in recent years, many low-income Vermonters have been moving out of the state in search of higher-paying jobs and lower taxes. At the same time, higher-income earners have been moving into the state from places like New York and Massachusetts.
The previous year, however, showed an opposite trend in Vermont — between 2018 and 2019, the AGI of taxpayers who left Vermont was 4% higher than the AGI of taxpayers who came into the state.
Rhode Island is the third high-tax state where incoming AGI was higher than outgoing AGI. However, over 20% of newcomers came from states with even higher tax burdens. The previous year, the state saw the opposite trend — outgoing AGI was 8% higher than incoming AGI.
Where Did Taxpayers Migrate to in 2019 to 2020?
If you look at the top 10 destinations for taxpayers migrating out of their states, you'll see that many of the destinations are nearby. For instance, people leaving Alabama most commonly go next door to Georgia, and Illinois is the top destination for people leaving Indiana. However, proximity is certainly not the only trend.
In some cases, you can chalk up a destination's popularity to its large population. In other cases, you can see tax rates playing a role in migration. But again, taxes aren't the only reason that people migrate — many of the top destinations have great climates and/or beautiful scenery.
Here are the states that most frequently appear on the top 10 destination lists for outward migration from 2019 to 2020. The state is followed by the number of states that taxpayers are migrating out of.
- Florida — 49 states and D.C.
- Texas — 48 states and D.C.
- California — 48 states and D.C.
- North Carolina — 29 states and D.C.
- Colorado — 29 states
- Arizona — 25 states
- Virginia — 21 states and D.C.
- Georgia — 20 states
- New York — 16 states and D.C.
- Pennsylvania — 14 states and D.C.; Tennessee — 15 states
For example, 29 states have Colorado in their top 10 destinations for outbound migration. Florida is a top 10 destination for taxpayers from every state and the District of Columbia.
People are moving to Texas from everywhere but Vermont. Some Vermonters certainly moved to Texas — it just wasn't one of their top 10 choices. California also made the top 10 destination list for every state except for West Virginia. West Virginians tend to stay in the East, with the exception of some people who head for Texas.
Where Did Taxpayers Migrate From?
If you feel like you're overrun with Floridians, Californians, and Texans, you are not alone. These three states top the list of where taxpayers are migrating from, and people from these states are moving into nearly every other state.
Here are the states that most commonly appear in other states' top 10 lists of inflow migration.
- Florida — 49 states and D.C.
- California — 48 states and D.C.
- Texas — 48 states and D.C.
- Colorado — 24 states
- New York — 32 states and D.C.
- Virginia — 22 states and D.C.
- Arizona — 21 states
- North Carolina — 19 states and D.C.
- Georgia — 15 states
- Washington — 15 states
On this list, you see a mix. Some states inevitably make the list simply because they have large populations. Others are on the list because their high tax burdens are arguably driving their residents to other areas.
Table of IRS Migration Trends From 2019 to 2020
Dollar amounts are in the billions.
Get Help With Taxpayer Migration
Migration affects states' tax bases and their economies, but it also affects taxpayers. Moving to a different state can bring along a host of tax consequences. If you need help with taxes after moving to a different state, you should consult with a local tax professional who understands the tax laws in your state. Use TaxCure to search for a local tax pro today.
Sources: Wallethub Tax Burden by State, and IRS Data 2019-2020