By the numbers
Do taxes play some role in a person’s decision to migrate to a certain state? Looking at the IRS’ annual data on individuals moving from one state to another can help answer this.
The IRS’ most recent data show how many taxpayers moved into and out of Wisconsin to and from every other state between 2020 and 2021. The figures also show how much the combined adjusted gross income, or AGI, of the moving taxpayers amounted to.
Apart from a few outliers, the data show a correlation between states that Wisconsin taxpayers are moving to and from — and the difference between those states’ top income tax rates and Wisconsin’s. States with top tax rates higher than Wisconsin’s generally lost AGI to Wisconsin, while Wisconsin generally lost income to states with lower top tax rates.
The Badger Institute has covered this topic previously. A few key related pieces:
- A viewpoint from our President Mike Nichols, highlighting how Florida’s low tax climate has drawn a significant number of Wisconsinites to the Sunshine State, and another on how low the barriers to such a move can be.
- Original research from Professor Don Bruce of the University of Tennessee on how much economic growth in Wisconsin would be spurred by lower top tax rates, since many taxpayers hit by Wisconsin’s highest rate — eighth-harshest among states — are paying taxes on business income.
- A piece by Mark Lisheron discussing Iowa’s recent tax cuts and the surplus of revenue generated as a result.
- A detailed picture of Wisconsin’s tax system, from the Tax Foundation’s Katherine Loughead.
- An analysis by Mark Perry about the accelerating outbound migration from our top income gaining state, Illinois, and why people are choosing to leave the Land of Lincoln for Wisconsin.
The underlying data
Here we graph data from 19 states Wisconsinites moved to and from between their 2020 and 2021 tax returns. These are the states that, according to the IRS, Wisconsin’s net gain or loss was $10 million in AGI or more.
The y-axis of the graph depicts how much income on net moved into Wisconsin from another state (the positive values) or how much moved out (the negative values). The x-axis depicts how far above or below Wisconsin’s top income tax rate (7.65%) another state’s top rate is. So, a state above 0% on the x-axis has a top tax rate that’s higher than Wisconsin’s; vice versa for a state that is below 0%. States at -7.65% are those with no state income tax. The dotted line is the linear correlation.
A word about Iowa: Under previously passed law, Iowa’s top tax rate has been falling by steps to 3.90% and as of 2023 is below that of Wisconsin, at 6%. This analysis, looking at taxpayers who moved between 2020 and 2021, uses the top rate that was prevailing in Iowa in 2020, 8.53%.
The underlying numbers
| Net taxpayers lost or gained by Wisconsin | Net AGI lost or gained by Wisconsin (000) | Top marginal state income tax rate in 2020 | |
| Florida | -2,166 | -463,888 | 0% |
| Arizona | -934 | -124,141 | 4.50% |
| Texas | -1,171 | -73,994 | 0% |
| North Carolina | -485 | -66,174 | 5.25% |
| Tennessee | -478 | -53,786 | 1% |
| South Carolina | -276 | -41,696 | 7% |
| Nevada | -102 | -35,079 | 0% |
| Georgia | -489 | -32,470 | 5.75% |
| Washington | -176 | -19,399 | 0% |
| Colorado | -394 | -17,093 | 4.63% |
| Michigan | 16 | -16,358 | 4.25% |
| Alabama | -152 | -13,256 | 5% |
| Ohio | -80 | -12,654 | 4.797% |
| Maine | -45 | -10,372 | 7.15% |
| Kentucky | -135 | -8,967 | 5% |
| Montana | -51 | -7,979 | 6.90% |
| Utah | -16 | -7,075 | 4.95% |
| Oklahoma | -115 | -6,972 | 5% |
| Virginia | -123 | -6,957 | 5.75% |
| Arkansas | -89 | -6,790 | 6.60% |
| New Hampshire | 1 | -2,499 | 5% |
| South Dakota | -38 | -2,127 | 0% |
| Mississippi | -12 | -1,915 | 5% |
| Vermont | -21 | -1,644 | 8.75% |
| Missouri | -44 | -1,228 | 5.40% |
| Wyoming | 3 | -818 | 0% |
| Indiana | 12 | -575 | 3.23% |
| Oregon | -36 | -105 | 9.90% |
| Nebraska | -5 | 75 | 6.84% |
| Pennsylvania | 13 | 88 | 3.07% |
| Alaska | -8 | 343 | 0% |
| Idaho | 26 | 396 | 6.925% |
| New Mexico | 29 | 572 | 4.90% |
| Hawaii | 13 | 612 | 11% |
| West Virginia | 1 | 812 | 6.50% |
| D.C. | -30 | 858 | 8.95% |
| Rhode Island | 15 | 858 | 5.99% |
| Louisiana | 40 | 1,430 | 6% |
| Kansas | 21 | 2,227 | 5.70% |
| Delaware | -3 | 2,727 | 6.60% |
| Massachusetts | -59 | 4,065 | 5% |
| Connecticut | 40 | 4,717 | 6.99% |
| Maryland | 28 | 5,534 | 5.75% |
| North Dakota | 149 | 8,366 | 2.90% |
| New Jersey | 82 | 9,947 | 10.75% |
| Iowa | 184 | 14,572 | 8.53% |
| New York | 123 | 37,124 | 8.82% |
| California | 437 | 75,705 | 13.30% |
| Minnesota | 1,439 | 243,892 | 9.85% |
| Illinois | 4,145 | 559,641 | 4.95% |
Published in the Dec. 1 issue of Top Picks.
