New York’s pandemic-induced exodus is killing the state’s bottom line.
The Empire State’s pool of adjusted gross income shrank by nearly $16 billion in 2021 compared to just two years ago — representing a major loss in potential tax revenue compared to pre-COVID levels, according to newly released data from the Internal Revenue Service cited by the Wall Street Journal.
The data shows New York lost a whopping $24.5 billion in state adjusted gross income in 2021 as residents relocated. That marked a major uptick from the state’s loss of $19.5 billion in 2020 and just $9 billion in 2019.
Much of that has wound up in Florida, which has seen a $10 billion windfall in 2021 stemming from newly arrived New York transplants, according to the data.
Adjusted gross income is used to help calculate how much a person owes in income tax.
“The overall income subject to tax in New York is going down because people are moving out,” said Andrew Cohen, senior manager for state and local tax group at Eisner Advisory Group, LLC.
Cohen said the overall hit to the state’s coffers is hard to gauge because residents are taxed at variable rates depending on their income. New York’s top earners are taxed at the highest rate in the nation at 10.9%.
“I’ve had a lot of clients calling about leaving New York for lower-tax states, especially Florida,” Cohen added.
New York wasn’t the only blue state hammered by outflows of income and the resulting hit to tax revenue.
California lost out on $29.1 billion in adjusted gross income in 2021 – or more than triple the state’s loss in 2019, according to the IRS data. Fleeing residents cost Illinois $10.9 billion in lost adjusted gross income in 2021, up from $8.5 billion in 2020 and $6 billion in 2019.
The largest beneficiaries of the mass exodus were states that have adopted more tax-friendly policies, such as Florida and Texas.
The Sunshine State, which does not have a state income tax, gained $39.2 billion in resident income in 2021 – an increase compared to its gain of $23.7 billion in 2020 and $17.7 billion in 2019.
Texas, another state that doesn’t levy an individual income tax, gained net inflows of $10.9 billion in adjusted gross income in 2021. The Lone Star State raked in a net gain of $6.3 billion in 2020 and $4 billion in 2019.
The shift in income is the latest indication in an ongoing exodus of New Yorkers to Florida and other low-tax havens.
Earlier this month, data from the Florida Department of Highway Safety showed that more than 10,000 New Yorkers have exchanged their licenses for the Sunshine State’s version.
The statistic is considered a solid measure of migration patterns because it indicates a long-term relocation plan.
In February, data from the Bureau of Labor statistics showed Florida had surpassed New York in total employment for the first time in 40 years.
Data released by the IRS late last year revealed that millionaires were leaving New York in droves – a trend that coincided with a spike in tax rates.
Tax filings indicated that the New York state residents who reported an adjusted gross income of more than $1 million fell to 54,370 in 2020 from 55,100 in 2019 — or a decline of 1.3%.
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