The wealthy were fleeing for low-tax states long before the pandemic slammed on the gas
- High-tax state residents were migrating to low-tax states pre-pandemic, per IRS data.
- Low-tax states, especially
Florida, are getting wealthier as a result.
- BofA says 'tax
migration' is far from a settled area but evidence of it is adding up.
Tax-induced migration was a key part of the narrative of 2020, but the story actually began long before that.Lower-tax states are continuing to get richer thanks to a steady influx of new residents from higher-tax states, per a recent Bank of America Research note, which looked at recently released IRS data for tax returns from 2019, reflecting 2018 earnings.
It also confirms the anecdotal evidence that Florida in particular is attracting many wealthier residents compared to pre-pandemic times, and is seeing its wealth increase at the expense of other states. The average AGI per return of people migrating from Florida to
But not all is lost for big cities, which make up a good chunk of revenue for high-tax states. Consider New York City: Those who left during the pandemic are already returning in droves. USPS data released last month showed that nearly half of the Manhattanites who moved to Florida plan to move back. The city also still remains home to the highest number of ultra-net-worth individuals in the world.A separate BofA Research report from May argued that reopening will spark a return to both NYC and San Francisco. "Both have the potential for some recovery in the near term," the note reads. "NYC and SF remain premier cities for young renters given their status as economic, financial, and cultural centers, and the pullback in rents over the past year helps affordability." It seems that, for some Americans, big cities will always have an allure. But, as evidenced by the pre-pandemic migration trend, others are increasingly ditching them for a more affordable way of life and better savings.
Only time will tell whether high-tax states become truly overrated.
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