Massachusetts Suffers Nation’s Highest Relative Decline in Million-Dollar Earners

Massachusetts has lost hundreds of thousands of residents over the last couple years. Now, new Internal Revenue Service (IRS) data shows high earners may be a substantial portion of this exodus.

According to IRS data now updated through 2023, the share of Massachusetts’ taxpayers in the million-dollar earning bracket has drastically declined since before the surtax on income over $1 million went into place. In fact, this decline is the highest in the nation, relative to state taxpayer population size.

While the data do not indicate why individuals entered or left the million-dollar category, the Commonwealth’s disproportionate decline raises important questions about its ability to retain high earners, whose income provides a significant share of state revenue.

An Unprecedented Loss of Million-Dollar Earners

From 2017 to 2021, Massachusetts experienced steady year-over-year growth in the number of in-state residents reporting at least $1 million in adjusted gross income (AGI) on their returns – peaking at 93,930 million-dollar earners in 2021. 

That trend reversed in 2022 — the same year the surtax on income over $1 million appeared on the ballot — with Massachusetts losing over 13,000 million-dollar-or-more earners. 

The latest IRS data shows Massachusetts did not recover in 2023: The number of million-dollar earners stagnated, with the state experiencing near-zero net growth (0.5%) from 2022 to 2023. As a result, since 2021, Massachusetts remains at a net loss of -12,730 residents of households reporting income of $1 million or more, representing a 13.5% decline. On an aggregate basis, not adjusting for population, that’s the third-highest number of million-dollar earners lost in the country, behind California and Washington.

Meanwhile, the state also saw a steep drop (-36.2%) in the combined adjusted gross income (AGI) from 2021 to 2023 reported by this group, representing a total loss of $48.7 billion in AGI. This includes $6.3 billion in AGI loss from 2022 to 2023. The data suggests higher earners in the category continue to leave the state — and Massachusetts is not attracting enough new people to replace them.

Mass Losses Are Significantly Higher than Competitor States

As a share of total taxpayers, Massachusetts’ loss of million-dollar tax earners is also the steepest in the nation. 

The Commonwealth’s decline in million-dollar earners from 2021 to 2023 represents 0.21% of all taxpayers in the state, more than three times higher than the national decline over the same time period. This population-adjusted loss represents the largest decline of any state nationwide.

Compared to lower-cost, lower-tax competitor states that are top recipients of Massachusetts’ former residents, Massachusetts’ loss of million-dollar earners is particularly concerning. For example, the Bay State’s loss since 2021 is roughly three times worse than competitor states North Carolina and New Hampshire. 

At the same time, competitor Florida gained 5,390 million-dollar earners, from 2021 to 2023. That’s equivalent to +0.03% of the state’s taxpayer population. This gain also means Florida’s million-dollar earner population is now growing faster than Massachusetts, when just several years ago before the surtax, Massachusetts was outpacing Florida.

Conclusion

Recent MOA polling confirms taxes are the primary driver pushing Massachusetts residents to move out. A disproportionately large share of surveyed former residents said the surtax factored into their decision to leave.

The latest data from the IRS provides even more insight on this trend. Since the surtax was introduced at the ballot, the state’s high-earner population is stagnating. Even worse, the taxable income subject to the surtax is declining. That’s a flashing red warning to state lawmakers: high tax policies like the surtax are driving out a substantial portion of income that generates tax revenue, which would hurt the state’s budget and cripple the economy.