California is experiencing the nation's worst tax income migration, with a net loss of $343.2 million in 2021 alone, as wealthy earners continue to leave the state.
A study released July 18 by MyElisting.com, a commerical real estate website, showed that high income tax rates and a high cost of living are fueling the exodus of wealthy earners in California to other states. The study reported the top four states with the highest net negative tax income migration were California, New York ($299.6 million), Illinois ($141.7 million), and New Jersey ($135 million).
According to U.S. Census data, California's population declined in 2022 for the third straight year. New York, Illinois, and New Jersey also have seen similar population declines.
"These trends affect the state's economy, especially the real estate and job markets," the study said. "The departure of high-income earners can decrease demand for luxury real estate and potentially affect the commercial real estate sector. It also impacts job creation, as these high-income individuals often play a significant role in business expansion and entrepreneurial activities."
The top four states with the highest net positive tax income migration were Florida ($12.4 billion), Texas ($10.7 billion), Arizona ($9.4 billion), and Colorado ($8.6 billion), the top two of which have no state income tax.
"High-income earners are increasingly choosing the Sunshine State, reflecting an age-old economic axiom: Money goes where it is treated best," the study said. "Florida's appeal to high-income earners is increasingly palpable. It stands out even among low-tax states like Texas, underlining its compelling attributes. The state's financial landscape, myriad growth prospects, and debtor protections present a lucrative proposition for individuals and families with substantial income and assets."
The study said it sourced data from the IRS's Statistics of Income Tax Stats – Migration Data. It extracted state-by-state tax migration data, focusing on high-income earners as defined by IRS parameters. Net income migration for each state was calculated by subtracting outgoing migrants' total income from incoming migrants' total revenue.
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