FACT CHECK: Is Mass’ Tax Climate Driving Away High-Income Residents and Businesses?

Massachusetts has historically been an economic powerhouse with world-class universities, cutting-edge industries, and a highly educated workforce. But the state’s competitive edge is eroding due to high taxes and a rising cost of living.

The Massachusetts Society of CPAs’ (MassCPAs) 2025 Public Policy and State Competitiveness Report further confirms these concerns.

FACT: Massachusetts is experiencing a significant outmigration of high-income earners.

According to the MassCPAs survey of nearly 200 certified public accountants (CPAs) representing approximately 4,600 high-income clients (those with annual taxable income exceeding $1 million), a striking 70 percent of CPAs had clients who changed their main legal residence for tax purposes in 2024.

What’s driving this exodus? The survey identified lower taxes (47 percent) and cost of living (17 percent) as the primary motivations to move to other states. Perhaps most alarming is that these departing residents aren’t primarily retirees seeking warmer climates—55.5 percent of those relocating are between the ages of 30 and 60, representing individuals in their prime working and earning years.

This trend is particularly troubling because it suggests Massachusetts is losing not just current wealth but future economic potential as productive workers take their talents, entrepreneurship, and tax dollars elsewhere.

FACT: High taxes are a primary motivator for relocation.

The survey findings are unequivocal about the role of taxes in driving relocation decisions. For 30 percent of clients, taxes were the top reason for moving, while 65 percent considered tax policy one of several significant factors. Only a mere five percent stated that taxes were not a consideration in their decision to relocate.

In September, MOA’s polling found similar results with 82.3 percent of respondents citing high taxes as a main factor in people leaving Massachusetts.

Where are these high-income earners going? According to the MassCPAs survey, Florida, New Hampshire, Texas, and South Carolina consistently rank as top destinations—all states with more favorable tax environments. Florida, New Hampshire, and Texas offer no state income tax, while South Carolina provides lower overall tax burdens combined with lower costs of living.

FACT: Businesses are reconsidering their presence in Massachusetts due to tax burdens.

The outmigration concern extends beyond individuals to businesses as well. According to the MassCPAs report, 27 percent of their members’ business clients are reconsidering their presence in Massachusetts—an increase from 22 percent in 2023. This upward trend signals growing dissatisfaction with the state’s business climate.

FACT: The state’s fiscal health is increasingly reliant on high-income taxpayers.

Massachusetts currently benefits from stronger-than-expected collections from the income surtax on high-income residents. In FY24, the state collected $967 million more than expected from the surtax alone. Without this surplus, Massachusetts would have faced a $463 million budget shortfall.

This situation creates a precarious dependency on high-income earners for the state’s fiscal sustainability. As more wealthy residents leave, this revenue source becomes increasingly vulnerable. Additionally, budget officials warn of potential future volatility in surtax collections and cite risks including changes to the federal State and Local Tax (SALT) deduction cap, which could reduce state revenues by approximately $1 billion if it expires as scheduled in December 2025.

It is important to note that although the elimination of the SALT deduction cap will lower overall state tax revenue, it will help relieve the overall tax burden for middle-class Massachusetts residents as well as small businesses. According to a 2021 TaxNotes report, Massachusetts is the fifth hardest hit state by the SALT deduction cap, hurting the Commonwealth’s overall competitiveness.

FACT: The outmigration trend poses long-term economic challenges.

The trending departure of high-income individuals and businesses threatens Massachusetts’ long-term economic vitality. Despite the state’s population growth of nearly 70,000 last year, this increase was primarily driven by international immigration while domestic outmigration of over 27,000 residents continued. 

Businesses in the Commonwealth are struggling with workforce challenges as well. The MassCPAs survey shows that 42 percent of businesses are focusing on talent retention strategies, including increased workplace flexibility, and 21 percent are turning to contractors and gig workers. While Massachusetts has implemented initiatives like the Internship Tax Credit to strengthen the talent pipeline, businesses are still struggling to counter ongoing workforce shortages.

The availability of skilled labor played at least a partial role in the decision to relocate for nearly half (49 percent) of business clients, according to the MassCPAs report. For one in five business clients, this was a major factor.

While some businesses have chosen to leave the Bay State for greener pastures, other companies in the Commonwealth have been forced to close. According to recent data from the U.S. Bureau of Labor Statistics, Massachusetts had more businesses closing and downsizing than opening and growing in Q2 (April through June) of 2024.

Conclusion

The data from the 2025 MassCPAs report underscores a troubling trend: high-income individuals and businesses are leaving Massachusetts, driven primarily by tax burdens and cost of living concerns. This exodus affects more than the state’s immediate fiscal health. The shrinking of the tax base jeopardizes the revenue that the state will be able to collect in the long run to properly serve the people of Massachusetts. 

House leadership recently released a budget proposal for fiscal year 2026 that avoids any new taxes – a definite step in the right direction. Our policymakers must address these issues to retain and attract residents and businesses vital to the Commonwealth’s prosperity.