According to new data from the Internal Revenue Service, Massachusetts saw a net outflow of $4.2 billion in adjusted gross income (AGI) in 2023; this is one of the highest totals in the country. The move in revenue following the additional tax on millionaires has given new impetus to the debate over whether higher taxes on top earners strengthen state finances.
Millionaire surtax to go into effect after voter approval
The outflows come in the first year that residents were subject to a 4% surtax on income over $1 million. Voters in Massachusetts approved the tax in 2022, with the revenue earmarked for education and transportation investments.
Supporters argue that the tax reflects voters’ willingness to fund public services through progressive taxation. Critics say it risks undermining long-term economic competitiveness by encouraging high-income earners to move.
Revenue outflows increase even as departures slow down
Despite the decline in the total number of taxpayers leaving the state, the amount of income they brought with them increased by 8% compared to last year. IRS migration data showed that although fewer residents moved in 2023, those who migrated generally had higher incomes.
This dynamic complicates efforts to measure the full impact of the tax because both migration patterns and income levels shape the fiscal outcome.
High-income residents accounted for approximately 70% of the $4.2 billion in net AGI output. This share marked a significant increase compared to previous years and more than doubled compared to 2019 levels.
This trend suggests that wealthier taxpayers are playing an increasingly central role in shaping the state’s immigration-related revenue challenges.
Long-term immigration trends predate the surtax
Net revenue outflows from Massachusetts have been occurring for years, long before the millionaires tax was enacted. In fact, total revenue losses were higher in 2021 than in 2023.
The lockdown has accelerated displacement trends across the country; Remote working and lifestyle changes have led many households to re-evaluate where they live and pay taxes.
Florida and New Hampshire remain top destinations
Many of the residents who left moved to lower-tax states such as Florida and neighboring New Hampshire, which do not tax wages or capital gains.
These destinations continue to attract affluent households looking to reduce their tax burden while maintaining access to business networks and amenities.
Supporters point to strong revenue gains
Supporters of the additional tax emphasize that more than $6 billion in revenue has been generated since its implementation. Collections have increased each year, reaching $1.3 billion so far in fiscal 2026, up 19% from the previous year.
“This gain provides the clearest indication that very high-income earners continue to contribute income at increasing rates based on their residence in Massachusetts,” the progressive organization Massachusetts Budget and Policy Center said in a statement.
Critics warn of shrinking tax base
Opponents argue that rising outflows indicate a growing structural risk. Trying to make money with a smaller tax base will be harder.
Business-backed groups argue that the additional tax could discourage investment and entrepreneurship over time.
The three organizations support ballot initiatives they say will increase economic competitiveness. One proposal would reduce the state income tax rate from 5% to 4%, while another would limit how much state revenue can increase annually.
Supporters believe such measures could slow immigration and encourage businesses and high-income earners to stay in the state.
State leaders warn of budget shortfalls
Gov. Maura Healey and other officials have criticized the proposed tax cuts, warning that they could create a multibillion-dollar hole in an already tight budget.
The debate underscores the difficult balance between maintaining fiscal stability and maintaining economic competitiveness in a changing tax environment.
IRS migration data reveals shift from Blue states to Red states
The loss to high-income taxpayers is not unique to Massachusetts. Newly released 2022-2023 immigration figures by the Internal Revenue Service highlight a major shift in residents and incomes across the US; This has significant impacts on state budgets, housing demand, and long-term economic competitiveness.
Low-tax states are emerging as clear beneficiaries of this trend. Florida gained a net gain of 113,494 people, including 50,485 high-income earners; This translates into a remarkable revenue stream of $20.7 billion; More than $17 billion of that came from the highest-earning households alone. Texas followed closely behind, adding 111,079 net new residents and $5.3 billion in additional income.
At the same time, high-tax coastal states experienced large outflows. California recorded the nation’s largest population loss, with 205,788 net departures; Including 37,777 high-income earners; collectively they took $13 billion in income with them, $7.6 billion from top earners alone. New York also reported heavy losses, losing 161,963 residents and $10.6 billion in lost revenue. In the two states combined, nearly 368,000 people and $23.6 billion in annual income were relocated in just one year; a shift that underscores growing concerns about shrinking tax bases.
Other Democratic-led states are exploring similar taxes
Massachusetts is not alone in imposing higher taxes on wealthy citizens. States such as California and Washington have considered or enacted similar policies, in part to offset federal funding cuts enacted under President Donald Trump and finance ambitious spending plans.
As more states impose additional taxes on top earners, the Massachusetts experience is likely to remain a closely watched precedent in the evolving economics of tax policy.
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14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing significant income support during retirement. At a time when inflation is at its highest level in four decades, Social Security’s inflation-adjusted benefits provide protection against rising costs.
Rising interest rates have disrupted many retirement portfolios and caused bond fund values to decline. In this volatile financial environment, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
14 Essential Strategies to Maximize Your Social Security and Avoid Costly Mistakes
11 reasons to claim Social Security early
Deciding when to claim Social Security is often about maximizing your benefits. Financial planners generally recommend delaying your claim as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with full payout available at your full retirement age (FRA); this age is currently between 66 and 67 years old, depending on your year of birth. Claiming before FRA will result in a permanent decrease in your monthly earnings, while waiting after FRA will result in a permanent increase. But the decision isn’t just about maximizing the monthly check. Personal factors such as health, family circumstances and financial needs can play an important role in determining the right time to make a claim.
11 Reasons to Apply for Social Security Early
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John Dealbreuin came to the United States from a third world country without knowing anyone and with only $1,000; Guided by an immigrant dream. He reached his retirement number in 12 years.
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