Tax & Accounting News
New York and California Lost $90 Billion During the Pandemic
New York and California, both high-tax states, lost over $90 billion in income during the COVID-19 pandemic, according to a new report.
CNBC shared details about recently released IRS data that confirms that New York State lost $25 billion in adjusted gross income in 2021, plus an additional $20 billion in losses in 2020. Similarly, California lost $29 billion in 2021 and $18 billion in 2020. Together, the two states lost approximately $92 billion in just 24 months.
The primary reason for this was a mass exodus of high-income earners.
The pandemic acted as a catalyst for many wealthy residents of both New York and California to move to lower-tax states, such as Texas and Florida.
Per CNBC's assessment, it is likely that higher-tax states will continue to see high earners leave. This trend can largely be attributed to the rise of remote work. E.J. McMahon, founding senior fellow at the Empire Center, told the outlet, “When we get the data for 2021-22 and 2023, the outflow is certain to have slowed to some extent, which does not in my view, mean migration will have ceased to be a problem.”
While the relocation trend is problematic for The Golden State and The Empire State, there have also been winners in the situation. The Sunshine State, for example, has hugely benefitted.
Florida -- where Governor Ron DeSantis (R) is currently embroiled in a battle with the state's largest employer, The Walt Disney Company -- increased it's population by a net 128,000 households in 2021. These new residents brought over $39 billion in income with them.
Nearly 1/3 of the income came from people leaving New York, New Jersey, Illinois (Chicago), and California.
It is not shocking that high-income Americans are leaving for Florida full-time. The state has long been a bastion of wealth, particularly in areas like West Palm Beach.
With virtual work becoming increasingly common, and the travel industry once again functioning normally, there is little reason for those who can work from home most of the time -- and afford to travel for business when needed -- to stay in high-tax states with severe winter weather.
It makes perfect sense that these taxpayers would turn sunny states like Florida into their full-time homes.
What do you think about this relocation trend?
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