New IRS data reveal the state loses twice as many high earners as it attracts
Using new data released by the Internal Revenue Service for tax years 2017-2018, the Institute found that while residents leaving the state come from all income brackets, Illinois is losing more than twice as many wealthy residents as it is attracting.
These findings come as Illinois voters will decide Nov. 3, 2020, whether to scrap Illinois’ constitutionally protected flat income tax for a progressive income tax. Gov. J.B. Pritzker has promised the $3.4 billion tax hike will fund programs, services and new spending.
Other highlights from the analysis:
- A cumulative loss of $32 billion in income to other states during the decade is the second-largest loss of any state in the nation in both raw dollar terms, after New York, and on a percentage basis, after Alaska.
- Since 2010, Illinois has not seen a single year in which the state gained AGI on net from other states.
- Illinois showed a net loss of $6.9 billion in AGI to other states in tax year 2017 and $5.6 billion in AGI to other states in tax year 2018, the worst losses of wealth on record.
- The largest age group leaving the state in tax year 2018 were those of prime working age, with 58% of those leaving aged 26-54. Those who moved were also higher-skilled workers choosing markets with more job opportunities.
- Those who left Illinois made on average $18,000 more than those who moved into the state.
- In tax year 2018, Illinois lost residents to 43 states on net. Illinois only gained a combined 191 residents from the remaining six states: Vermont, New York, Louisiana, Pennsylvania, Connecticut and New Jersey.
- While Illinois is losing income at all brackets, those who earn $200,000 or more are leaving twice as fast as average-income residents. The only state to see a higher share of residents making more than $200,000 leave in tax year 2018 was New York.
Orphe Divounguy, chief economist for the nonpartisan Illinois Policy Institute, offered the following statement:
“When Illinoisans leave the state, they don’t go empty handed. They take with them jobs, opportunity, talent and financial assets that would otherwise have fed Illinois’ economy. This makes state budgeting more complicated and puts more financial pressure on those who remain in the state.
“The consistent loss of more people to other states and higher-earning residents to other states should exacerbate concerns over Gov. Pritzker’s biggest policy priority: the progressive income tax. The policy increases taxes on the Illinoisans already most likely to exit the state, which means Illinois will be forced to hike income taxes beyond Pritzker’s introductory rates as the revenue runs short. Illinois is running out of rich people to tax. We must protect the middle-class residents who will be left picking up the tab.”
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