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New Analysis Details Enormous Economic Consequences as Earners Flee Blue States for Red

A new analysis of IRS data shows the financial consequences of gaining or losing population can be either extremely rewarding or devastating to individual states. In 2020, blue states repelled the highest earners while red states attracted them, resulting in massive economic losses and gains.

Wirepoints, an Illinois-based research organization, took a look at the latest migration data released by the IRS and drew some conclusions that should leave Democrat-run states in a cold sweat, wondering how they’ll ever be able to maintain their profligacy.

In the competition for America’s best and brightest residents, the most populous blue states are becoming perennial losers. In 2020, New York, Illinois, California, Massachusetts, and New Jersey suffered net losses in their population, with high-earners taking their income — and tax base — with them:

  • New York was the biggest loser, netting a loss of almost 250,000 residents, who took with them a net of $19.5 billion in income — fully 2.5% of the state’s entire adjusted gross income (AGI) in 2019.
  • California did second-worst, losing a net of 263,000 residents and $17.8 billion in income.
  • The third biggest loser was Illinois, whose 101,000 emigrants took income worth $8.5 billion with them
  • Massachusetts came in fourth with a net loss of $2.6 billion.
  • New Jersey took fifth place with $2.3 billion in lost income.

Not only are fewer people moving into these sputtering states than are moving out, but the newcomers tend to bring less wealth with them than the leavers took. For example, people who moved to Illinois in 2020 made, on average, $30,600 less than those who departed. When taken as a percentage of the state’s 2019 AGI, this was a 1.9% loss for Illinois, making it second only to New York state for lost income as a percentage of state AGI.

Heading up the winner’s column were Florida, Texas, Arizona, North Carolina, and South Carolina:

  • Florida was Americans’ number one destination, netting 167,000 new residents who brought with them $23.7 billion in new income — a hefty 3.3% of Florida’s total 2019 AGI.
  • Texas took second place with a net income increase of $6.3 billion.
  • Third-place Arizona gained $4.8 billion.
  • North Carolina took fourth place with an income increase of $3.8 billion.
  • South Carolina came in at number five with a net increase of $3.6 billion.

Wirepoints included a graph of the top ten states that had net gains in AIG in 2020:

Source: Wirepoints.org

The thing about losing productive people is that it isn’t a one-time financial hit: the income loss hits year after year. Not only that, the effect is cumulative.

The problem with chronic outflows, like in the case of New York, is that one year’s losses don’t only affect the tax base the year they leave, but they also hurt all subsequent years. The losses pile up on top of each other, year after year. And when a state loses income to other states for 21 straight years, the numbers add up.

In 2020 alone, New York would have had nearly $123 billion more in AGI to tax had it not been for the state’s string of yearly migration losses. And when the state’s AGI losses are accumulated from 2000 to 2020, it totals $1.0 trillion in cumulative lost income that could have been taxed over the entire period.

Ouch.

Conversely, repeat winners like Texas and Florida stack gains upon gains over the years. “In 2020 alone, [Florida’s] tax base was some $197 billion higher due to the 20-year string of positive income gains from net in-migration,” reports Wirepoints.

Big blue states have been resting on their laurels for generations, counting on their traditional cachet to lure big earners. At the same time, these liberal-run states have adopted policy after policy that chipped away at their citizens’ quality of life as well as their ability to generate income: increased regulation and micromanagement; higher taxes; bizarre culture war accommodations; and crime-friendly reforms all contribute to worsening conditions. Intrusive mask and vaccine mandates and heavy-handed shutdowns during the COVID-19 era were the last straw.

When Americans vote with their feet, the real winner is freedom.

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