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“States, cities and counties on the losing end of the migration have fewer tax dollars to spend.”
The coronavirus pandemic caused many changes across the U.S., including people upping stakes and moving. In 2022, close to 1 million more Americans moved across state or county lines than in 2019, according to the U.S. Census Bureau.
As this “great sorting” continues, it is worth looking at the flow of funds within the U.S. — the taxable income that pandemic movers took with them from one location to another. It is in fact a zero-sum game — states, cities and counties on the losing end of the migration have fewer tax dollars to fix some of the very problems that cause people to move. Meanwhile, pandemic winners gain those funds as well as the energy and spending power of the new residents, which can make them more economically dynamic.
At the city level, Manhattan was the biggest loser, with $16.5 billion of outflows to other states in 2021, with $4.6 billion of that going to Florida, according to new Economic Innovation Group research. The budget for New York City, counting all five boroughs, is about the same as the state of Florida’s at around $100 billion, so the hit to Manhattan is substantial, causing the city to now mandate budget cuts across the board.
Some cities had net gains of basically zero, such as Nashville, Tenn., which experienced a net AGI inflow of $105 million over this period. But that gain masks a tremendous amount of churn. In total, Nashville gained $2.3 billion from people who moved in, while it lost about the same amount — $2.2 billion — due to movement away.
At the state level, the largest contributor to Florida was New York, with a net outflow of $9.8 billion to the Sunshine State. California saw the greatest loss with a net outflow of $29.1 billion at the state level, the largest share of which went to Texas.
Meanwhile, Florida was the biggest beneficiary with a net gain of $39 billion from other states (almost $30 billion more than the next-closest state). Former New Yorkers alone took $2.9 billion in taxable income to Miami-Dade County and another $1.1 billion to Palm Beach County.
For scale, Florida’s annual budget in 2021 was $101.5 billion. The state recorded a record budget surplus of $21.8 billion in 2022, a 24% increase from the prior year. For the 2023 budget year, the surplus has been used to fund new projects and also provide tax relief including in the form of sales-tax exemptions for essential baby items.
A lot of the movers and their money stayed in the same geographic region for the most part. Just as New Yorkers stayed on the East Coast but moved south to Florida, large transfers of income from the West Coast moved toward Phoenix, Denver and the rest of the Mountain West.
“ A New Yorker earning the national average in wages saves $5,500 a year in taxes by moving to Florida.”
Why did people leave? We can assume some of the moves related to pandemic policies such as school and business closures, with states such as Florida and Texas reopening earlier than the states that lost the most income (New York and California). Taxes could have also played a role, with New York having the highest total state tax burden (income, property, sales, license and other taxes on individuals) at more than 13% of income (with Manhattan’s total even higher at about 17% counting sales taxes). One analysis found that a New Yorker earning the national average in wages saves $5,500 a year in taxes by moving to Florida.
Increasing crime rates are likely to also have been a factor, with estimates showing property and violent crime increasing in Chicago by 34% and in New York City by 33% from 2019 to 2022 and murder rates increasing statewide in New York by 47% and California by 36%, according to the CDC.
In addition, many pandemic movers sought cheaper housing, with Manhattan topping the list of most expensive housing markets, and San Francisco; Brooklyn, N.Y.; Orange County, Calif.; and Los Angeles all in the top 10. Economic Innovation Group research has found that the pandemic is impacting housing prices, with inflation-adjusted rents rising by 8% and sales prices rising more than 20% from 2020 to 2022 — a natural response to constricted housing supply in some areas thanks to zoning and other regulation.
Finally, many families with young children seem to have responded to school closures and perceived quality-of-life issues by fleeing urban areas, according to our research. The number of children under the age of 5 in large urban counties has declined more than 6% from 2020 to 2022, almost double the rate of decline nationally.
As the U.S. continues to adjust to changes caused by the pandemic, it is important for decision makers at all levels of government to understand that the policies they implement have consequences, and that Americans with not just means but the opportunity to move — a category that expanded drastically as workplace policies responded to the global coronavirus outbreak in early 2020 — are likely to do so, impacting state and local coffers.
D.J. Nordquist is executive vice president of the Economic Innovation Group and a former chief of staff at the White House Council of Economic Advisers.
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