FACT CHECK: MassBudget and Policy Center Gets it Wrong on Outmigration

A recent report by the Massachusetts Budget and Policy Center (MassBudget) brushes off the “fluctuations” in migration as a minor issue and says that the “millionaire’s tax” can’t be blamed for pushing people – and taxable wealth – out of the state. Let’s see what the data say.

FACT: Massachusetts outmigration is real–and it’s getting worse.

MassBudget’s claim that outmigration is a non-crisis relies on data from the Census Bureau, which is based on population estimates extrapolated from four-year-old information collected at the beginning of this decade.

Yet, far more reliable data is available. The Internal Revenue Service (IRS) Statistics of Income (SOI) division data, which discloses actual individual tax returns filed, reveals that Massachusetts experienced a net loss of tax filers and adjusted gross income in recent years. That means the sum of filers leaving the state is greater than the sum of filers coming into the state. Massachusetts saw the worst net outmigration since before the pandemic in 2022, the latest year of data available. 

To be exact, 159,200 people left the state between Filing Year (FY) 2021 and FY2022, while just 113,586 people moved into Massachusetts from out of state during the same timeframe. That amounts to a net loss of 45,614 people in population size. According to an analysis by Pioneer Institute, there are only four states that have worse net migration losses: California, New York, New Jersey, and Illinois. 

Massachusetts didn’t just lose a net 45,614 people. In reality, 159,200 Massachusetts citizens moved out of state, taking about $13.21 billion in adjusted gross income (AGI) with them. Only $9.37 billion in AGI migrated into the state, leaving Massachusetts with a net loss of about $3.9 billion in taxable income, according to IRS data.

The size of the AGI loss is increasing: As Pioneer Institute pointed out in July, Massachusetts net loss of AGI has grown from $900 million in 2012 to $3.9 billion in 2022. Even CNBC found that migration into Massachusetts is slowing, contributing to Massachusetts receiving a failing grade in “workforce” in their Top States for Business Rankings.

These problems aren’t unique to Massachusetts. The Boston Business Journal points out that peer Northeast states such as Connecticut, New York, and Rhode Island also have elevated rates of outmigration. But when controlling for non-migrating population size, Massachusetts has the unfortunate distinction of being the worst net outmigration in New England, and the second worst in the Northeast, as we’ll explore in an upcoming analysis.

Importantly, Connecticut, New York, and Rhode Island residents also face high tax and regulatory burdens, which illustrates how these factors are contributing to the overall exodus from the Northeast.

FACT: Higher earners who shoulder more of our state’s tax burden make up 55 percent of all income leaving Massachusetts.  

MassBudget attempts to downplay the number of higher income people leaving the state, writing, “Data show that Massachusetts’s migration story is primarily one about lower- and middle-income households.” This is misleading: As the table below demonstrates, although high earners account for only 22 percent of the net outmigration, they are responsible for the majority (55%) of the net loss in taxable income.

This is a consistent trend: In 2021, Massachusetts lost about $2.6 billion, just over 60 percent of the total AGI lost that year, due to the outmigration of taxpayers earning $200,000 or more. The following year, Massachusetts lost an additional $2.2 billion in AGI, 56 percent of the total AGI loss in 2022, as a result of high-income earners leaving the state. 

Early data suggest this dynamic may worsen due to the passage of the “millionaire’s tax.” The Massachusetts Society of CPAs recent 2024 Public Policy and State Competitiveness Report found that 90 percent of Mass. CPAs surveyed indicated that their high-income clients were considering leaving Massachusetts in the next year. The survey also showed that the “millionaire’s tax” was a major factor in the decision to move, with 64 percent of respondents reporting it as one of the reasons their clients are moving. 55 percent said that the 4% surtax on income over $1 million was the primary reason for leaving Massachusetts.

FACT: Younger, higher-earning residents are also leaving the state–and that’s a big deal. 

Out-migrants in the 26-to-44 age bracket account for 44 percent of total AGI leaving the state. Their departure could mean several things: 

• It may be that they can’t find opportunities in Mass. to grow professionally; 
• They cannot afford housing costs in the Bay State, including buying a single family home to raise a family;
• Remote work is enabling them to enjoy higher salaries in locations where those earnings can be stretched further.
  

In September 2024, we polled over 500 Massachusetts residents on what they believed to be the top issues causing people to leave the state. 65.7 percent of respondents said that high taxes were a main factor. In a separate question, 82.3 percent reported that their taxes are too high; among 18–34-year-olds, that number was 87 percent. Of those who thought their taxes were too high, 70.6 percent said that income taxes personally cause them the most hardship. 

The loss of the 26-to 44-year-olds is especially alarming when one considers the future of Massachusetts. Young people are the state’s future tax base, and if not already, may be future high earners. If the millennials leave in droves now, Massachusetts risks losing future wealth and a large portion of its future tax base.

Conclusions

The financial and demographic shifts are not just numbers; they represent real people and real economic potential leaving the state. 

The immediate effects of the monetary loss of income and a weakened talent pool in a state already facing labor shortages are troubling. The longer-term effect of eroding Massachusetts’ tax base is even more concerning. If the tax base shrinks or fails to grow with current levels of Massachusetts’ spending, the quality of life for Massachusetts residents will begin to suffer. With less revenue from income taxes, less dollars will be available to support the state programs and structures that make life better in the Commonwealth.

Addressing these trends could help Massachusetts regain its status as a desirable place to live and work. Without action, the state risks further economic decline and a diminishing tax base, putting its future in jeopardy.