New York and California Lose $92B in Income as Wealthy Americans Flock to Low-Tax States

New York and California, two of the most populated and highest taxing states in the United States, have experienced a significant loss of income as wealthy Americans flee to states with lower tax burdens.

New York and California lost a combined $92B in income as rich Americans escaped to other states. (Photo: iStock)

New York and California Lose $92B in Income

According to data from the Internal Revenue Service (IRS), New York and California have lost a staggering $92 billion over the course of two years.

New York lost $25 billion in adjusted gross income due to migration out of the state in 2021, in addition to the $20 billion lost in 2020. California, on the other hand, saw a loss of $29 billion in 2021, following an $18 billion loss in 2020.

In total, New York and California have lost a staggering $92 billion over the course of two years, causing their budgets to shift from surplus to deficit, Yahoo reported.

While the COVID-19 pandemic has played a role in the exodus from New York and California, the trend of higher-income earners and businesses seeking lower-tax areas has been growing for some time.

However, the scale of the recent losses is unprecedented.

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Why did New York and California Lose $92B?

According to an analysis of IRS statistics by CNBC, the combined losses experienced by New York and California in the post-pandemic years far exceed the losses from 2019.

So, where are these taxpayers relocating? The answer is Florida.

In a surprising turn of events, Florida emerged as the big winner in terms of migration.

By the end of 2022, Florida had a total of 9.6 million non-farm jobs, nearly equal to New York’s tally of just under 9.7 million. In fact, Florida has recently surpassed New York in job creation, marking the first time in 40 years that New York has been outranked in this regard.

Florida has experienced a significant income boost as a result of this migration and job creation. In 2021, the state generated $39 billion in income, representing a 39% increase from the previous year’s $28 billion.

Notably, a substantial number of new residents in Florida have come from New York, drawn by the state’s absence of income tax. In contrast, New York imposes income tax rates as high as 10.9%.

A similar pattern can be observed between Texas and California. Texas gained $11 billion in income in 2021, with $5 billion of that coming from migrating Californians.

California’s graduated income tax rates, reached a maximum of 13.3% for individuals earning over $1 million, making it the state with the highest tax rate in the nation. Conversely, Texas does not impose an income tax.

The consequences of these population and income shifts are evident. As of mid-2023, both New York and California are projected to face deficits, eroding their once-robust surpluses. California estimates a deficit of $24 billion in 2023, while New York’s shortfall is expected to increase from approximately $1 billion in 2023 to $7.07 billion by 2025.

In conclusion, the recent exodus of wealthy Americans from high-tax states like New York and California has resulted in significant income losses for these states. Florida, with its absence of income tax, has emerged as a prime destination for many individuals and businesses seeking a more favorable tax environment.

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