California and New York Have Lost More Tax Revenue in the Past Three Years Than Any Other State

A recent study has unveiled significant shifts in tax income due to population migration. California and New York, traditionally blue states, have suffered substantial losses, while Texas and Florida are reaping the rewards of an influx of new residents.

California’s Tax Loss

California, despite its allure, has seen a significant decline in tax revenue due to residents leaving. The state’s high personal income tax rates, coupled with its expensive cost of living, have prompted wealthy individuals to seek greener pastures elsewhere.

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In 2021, California lost over $340 million in IRS tax revenue due to migration.

Population Exodus and Its Implications

Between January 2020 and July 2022, California experienced a net loss of over half a million residents, with the number leaving surpassing those moving in by nearly 700,000. This exodus has real consequences, as evidenced by the state losing a House seat for the first time in its history. A declining population leads to an eroded tax base, impacting state finances.

Factors Driving Migration

A combination of factors is fueling the migration trend. California’s high cost of living and top income tax rate of 13.3% is pushing people away. Additionally, concerns about the state’s liberal politics and issues like the homelessness crisis are driving residents to seek alternatives.

Florida and Texas as New Destinations

Florida has emerged as a prime destination for those leaving high-tax blue states. The state witnessed a population increase of nearly 2% from July 2021 to July 2022, driven by about 319,000 Americans migrating there.

The tax-friendly environment of Florida has contributed to a $12.4 billion increase in tax revenue. Similarly, Texas attracted $10.7 billion in new revenue from migrating residents.

Other Impacted States

New York follows California in experiencing significant tax losses due to migration, shedding just under $300 million in yearly tax revenue. Other blue states like Illinois, New Jersey, and Massachusetts have also seen notable declines in their tax bases.

Population Voting with Their Feet

The population shift between high-tax and low-tax states is evident. High-tax states like California, New York, and Illinois have witnessed substantial population exodus, while low-tax states like Florida and Texas have attracted new residents. This migration underscores the influence of tax policies on people’s decisions.

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