The claim that wealth is leaving the state is often discussed, but does the data back it up?
We analyzed two decades of IRS statistics on income among people moving from state to state to see if we could answer that question.
Since the data are income-related, it doesn’t address accumulated wealth, but the income tax is the largest single source of state revenue, providing about $9.8 billion of the state’s $19.8 billion annual budget.
1. People moving out have more income as a group than people moving in
It’s virtually always the case that in a given year, people leaving the state take with them a higher combined income than people moving in, resulting in a net loss of adjusted income. In the data we analyzed, that trend held true in all but one year: 2003.
2. On average, people moving out don’t always have more income than people moving in
One reason more income leaves the state than moves in is simple: More taxpayers move out than in, according to the data.
When we look at the average – rather than the combined income – of people in each migration group, the results are far more mixed.
In some years people moving into the state had a higher average income than people moving out of the state; in other years they didn’t. This doesn’t refute the claim that wealthy people are leaving, but it doesn’t support it either.
It would have been preferable to have other data points in addition to average income, which can be skewed by extreme values. (We’d be happy to hear from readers what other data touch upon this topic.)
Here’s a look at the number of tax returns with change of addresses indicating a move out of Connecticut versus a move into the state.
3. Despite the out-migration, income usually rises
Looking just at movers misses the fact that most people don’t move in or out of the state from year to year. The combined income of new and existing residents increased in most years we looked at (15 out of 20), so it’s probably not fair to say there’s a net loss of income overall because of people moving.
While the number of people moving into the state has an impact on the net gains and losses from migration, it’s important to keep in mind that Connecticut has had the top adjusted gross income in the country, according to data going back to 1991, so the pool of people moving out is more likely to make more than people moving in.
About the data
The IRS statistics are based on the address changes on tax returns from 1992-1993 to 2012-2013. This data set has the benefit of combining the factors in which we’re interested – income and migration – as well as being pretty accurate, since it’s based on real tax filings. There are shortcomings, too. It leaves out people who don’t file tax returns, which could mean the poorest are left out of this data set altogether, skewing income figures higher.
The figures are based on 95 to 98 percent of returns and don’t include data from returns filed starting in “late September.” For more specific details on how the IRS compiles its state-to-state migration data, check out their explanation here.
Check our work
All of our calculations, including the code to transform more than 30 spreadsheets into usable data are available here. We invite you to check our work and use it as a starting point for your own research.