Interstate migration has been shifting the US population from the Northeast and the West Coast, which generally have higher costs of living and tax burdens, to the South and Southwest over the last 10 to 20 years.
These trends accelerated during the pandemic, when they were driven by changing work arrangements that allowed for more remote work in less urban locations as well as financial incentives to move from high-tax to low-tax states.
Goldman Sachs Research analyzed tax filings from the Internal Revenue Service (IRS) and estimated that, overall, 4% of households with over $1 million in adjusted gross assets moved states between 2017 and 2023, compared to prior trends. Among high earners, many moved out of New York and California, high-tax states, with a notable number migrating to Florida and Texas, low-tax states. This migratory trend has been accelerating in recent years, and it may have significant impact on state budgets.
In 2021, Goldman Sachs Research examined how increased state and local tax burdens and certain financial incentives have fueled interstate migration.
Generally, taxpayers who itemize may claim property, sales, or income taxes already paid to state and local governments for deductions on their federal taxes (known as the state and local tax deduction or SALT).
However, the 2017 Tax Cuts and Jobs Act (TCJA) capped the deduction at $10,000, which effectively increased state and local taxes and raised incentives for high-income households to relocate to low-tax states.
Goldman Sachs Research estimates that, nationwide, around 4% of households earning over $1 million moved states by 2023, likely due to or at least partially in response to the SALT deduction cap. The same trend is seen with 1.5% of households earning $500,000—$1 million and 1% of households earning $200,000—$500,000.
Source: Internal Revenue Service, Goldman Sachs Research
One of the most migratory populations of high-income earners is from New York. Goldman Sachs Research’s analysis suggests that, on average, over 10% of households earning over $10 million changed residency for tax purposes. For households earning $5 million to $10 million, 6% changed residency, as did 3% of those earning $2 million to $5 million.
Goldman Sachs Research finds that the migration trend is even more pronounced when considered as a share of adjusted gross income: High-tax jurisdictions like the District of Columbia, New York, and California experience annual income outflows of 1% or more. As an outlier, North Dakota also experienced an increase in outflows due to the end of the shale boom.
Meanwhile, low-tax states like Florida and western states like Idaho and Montana have seen notable inflows of income.
It’s not just the SALT cap that may have propelled high earners to migrate. Certain state tax increases may also be driving some of the relocations. For instance:
High earners are also likely to be business owners and may move their businesses as well. California and New York have seen large net outflows, while Florida has seen large inflows. Notably, this shift appears to be accelerating and was even more pronounced in 2022 and 2023 than in 2020 and 2021.
Meanwhile, lower-tax states have continued to reduce their tax rates over the last few years.
Goldman Sachs Research estimates that tax-related emigration has lowered tax revenue in high-tax states like New York, California, Oregon, and the District of Columbia by up to 3%. However, these fiscal challenges have had limited consequences so far, as state budgets remain healthy due to increased federal funding and strong revenue growth during and after the pandemic.
With the new tax bill signed into law, Goldman Sachs Research notes that it’s the higher-income households, such as those earning over $600,000 who are more likely to migrate to low-tax states, along with their businesses. Since the tax law’s changes to the SALT cap level are unlikely to affect this group, the interstate migration trend is likely to continue.
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