The Impact of Taxes on Interstate Migration

October 13, 2022
The map from The Tax Foundation show states’ gains and losses in resident population, income tax returns filed, and AGI attributable to interstate migration.

The Tax Foundation Reports: Every year, millions of Americans pack up and move from one state to another, providing unique insights into what people value when deciding where to live, work, and raise a family. For many years, policymakers, journalists, and taxpayers have debated the role state tax policy plays in individuals’ and businesses’ location decisions. Annual data about who is moving—and where—provide clues about the factors contributing to these moves.

Taxes are one such factor. The latest IRS and Census data show that people and businesses favor states with low and structurally sound tax systems, which can impact the state’s economic growth and governmental coffers.

Each year, the IRS releases migration data showing the movements of income taxpayers based on changes in their mailing address between filing one year’s income tax return and the next. The most recent data generally show location changes that occurred between when taxpayers filed their tax year 2018 returns in calendar year 2019 and when they filed their tax year 2019 returns in calendar year 2020. Notably, because the filing deadline in 2020 was extended by three months due to the COVID-19 pandemic, the most recent data capture more moves than usual because many taxpayers went 15 months, rather than the typical 12, between filing returns for tax years 2018 and 2019.

These data, therefore, capture many of the interstate moves made early in the pandemic—between mid-March and mid-July 2020—but do not necessarily capture the bulk of pandemic-related moves, many of which occurred later in 2020 and even into 2021. As such, when interpreting these data, it is important to keep in mind that many of these moves happened before the even more pronounced shift away from large cities and high cost-of-living areas that occurred during the pandemic.

Non-governmental datasets, including from U-Haul and United Van Lines, have the advantage of being especially timely, shedding light on moves that occurred even more recently, but the IRS data are by default more comprehensive and provide important insights into the movement of adjusted gross income (AGI) among states.

Winners and Losers of Interstate Migration

The IRS data show that between 2019 and 2020, 28 states experienced a net gain in income tax filers from interstate migration—led by Florida, Texas, Arizona, North Carolina, and South Carolina—while 22 states and the District of Columbia experienced a net loss—led by New York, California, Illinois, Massachusetts, and New Jersey. When all individuals associated with each tax return are accounted for, including spouses and dependents, 29 states experienced a net gain in individuals while 21 states and D.C. experienced a net loss. Only one state, Wisconsin, saw a loss in tax returns attributable to interstate migration but a gain in individuals associated with the returns of those who moved in.

The map and table below show states’ gains and losses in resident population, income tax returns filed, and AGI attributable to interstate migration.