NEW DATA: Mass Loses 150,000 Taxpayers, High Earners Drive Income Loss

In 2022, Massachusetts voters passed an income surtax into law. Since then, efforts to understand the tax hike’s impact on the economy have dominated debates over the Commonwealth’s waning competitiveness. 

New data from the Internal Revenue Service confirms that Massachusetts is losing talent and taxable income to lower-cost, lower-tax competitor states. 

Over 150,000 Taxpayers Left the Commonwealth in 2023, Taking Over $4 Billion in Income

The IRS Statistics of Income data  – the best available data when analyzing outmigration – shows that in 2023, Massachusetts saw a net loss of 30,460 residents, as 150,394 people moved out compared to 119,934 moving in. 

That equates to a net loss of $4.18 billion in adjusted gross income through outmigration in 2023, the first year the state’s surtax on high earners went into effect. 

Breaking down the data by tax bracket, we can see that the majority of AGI loss from 2022-2023 came from those making $200,000 a year or more. Essentially, the state is losing more income year over year since the surtax went into effect, and higher earners continue to drive this AGI loss. 

Up until 2022, AGI had actually seen significant growth year-over-year. Total AGI increased from roughly $314 billion in 2019 to over $412 billion in 2022, before falling to $394 billion in 2023.

Residents Are Fleeing to Lower Tax States

The ongoing erosion of the state’s tax base, particularly when it comes to higher earners, has important implications for the broader economy. After all, high-income taxpayers account for a significant share of state revenues and their departure can affect economic activity and long-term growth.

The destinations of those leaving tell an equally clear story. Lower-cost, lower-tax states continue to attract former Massachusetts residents. Florida saw a net gain of 7,879 residents from Massachusetts. New Hampshire gained roughly 7,000, and North Carolina added more than 2,500.

Conclusion 

Since the surtax passed into law, early empirical and anecdotal data warned against the unintended consequences that were already starting to take shape: fewer residents, less taxable income, and increasing pressure on those who remain.

Now, this latest data confirms what commonsense told us all along. Relying on surtaxes from high earners to fill budget holes is not a long-term solution to economic success. In fact, it mainly serves to drive taxpayers and the revenue they contribute out of our state. Continued loss in AGI will only exacerbate our state’s affordability crisis, as fewer residents are left covering a ballooning tax bill. As a result, our state’s competitiveness will continue to wane. 

Massachusetts does not have to accept this trajectory. To reverse this trend, policymakers should prioritize ways to lower taxes, increase affordability, and ultimately make our state a more attractive place to live and work.