IRS: Illinois led nation in rate of income loss in 2023

The state lost a bigger share per resident moving out than anywhere else in the country, according to IRS data.

Illinois lost a larger share of income from outmigration than any other state in 2023, according to IRS data.

Federal tax returns show that Illinois lost a net of nearly 56,000 residents and more than $6 billion in income in 2023, the latest data available. When adjusting for total income per state, Illinois’ losses to net outmigration are the worst in the country — more than $11 for every $1,000 previously earned in the state.

While California ($13 billion) and New York ($10.6 billion) lost more income from outmigration, Illinois lost the largest share of a state total.

Meanwhile, South Carolina and Florida, two of the top three states adding the most total income from people moving in, also added the most as a share of their total income.

Part of why Illinois sees so much wealth flight is that high-income Illinoisans are leaving at twice the rate of other groups. People in all income brackets are moving out of the state, but those earning more than $200,000 a year have been leaving the fastest.

Also, the substantially fewer number of those moving into Illinois earn much less than those who leave. The average adjusted gross income those moving in was $78,784 in 2023, according to the IRS, while the average AGI of those who left was $104,432 — almost 33% higher, further exacerbating the state’s economic losses from outmigration.

The vast majority of residents and income that left Illinois went to lower-tax states, further evidence of what Illinoisans routinely tell pollsters: High taxes are the No. 1 reason residents consider leaving.

Polling from NPR Illinois and the University of Illinois Springfield found that 61% of Illinoisans thought about moving out of the state in 2019, with taxes the No. 1 reason.

Back in 2016 the Paul Simon Public Policy Institute found that 47% of Illinoisans wanted to leave the state, and “taxes are the single biggest reason people want to leave,” with 27% of those respondents citing that as why.

More recent polling by Echelon Insights in 2023 substantiated that sentiment, as did polling conducted last year by M3 Strategies.

Illinoisans face one of the highest state and local tax burdens in the nation, including the second-highest property taxes and eighth-highest sales taxes. In 2017 Illinois residents endured the largest permanent income tax hike in state history, when lawmakers increased the rate by 32%, from 3.75% to 4.95%.

Despite Illinois’ continued outmigration amid an onslaught of taxes, state lawmakers are again pushing for higher income taxes in the current legislative session, including the potential to tax retirees.

A proposal that would add a 3% additional income tax on income above $1 million passed out of committee April 21, meaning it could get a full House vote at any time prior to the May 3 deadline for constitutional amendments.

That proposal comes at a time when Illinois is already pushing out tens of thousands of high-income residents who are taking billions of dollars with them to lower-tax states.

It’s not just individuals who might pay more. More than 22,000 small businesses — s-corporations and partnerships — that “pass through” their business income to their owners, who pay taxes as individuals, would suffer the hike, too.

Small businesses are Illinois’ primary job creator, both historically and in the recovery from the COVID-19 downturn. Illinois is already pushing more businesses out of the state than nearly anywhere else. This tax hike could make the situation even worse.

Contact your state representative to stop the Small Business Tax Hike here.