Taxpayer Net Outmigration Surged During the Pandemic. The number of taxpayers who move out of California each year ticked up in 2020 with the onset of the pandemic. At the same time, the number moving to California remained flat. As a result, annual net outmigration to other states nearly doubled—from about 170,000 people (taxpayers and their dependents) in 2019 to 300,000 people during the first three years of the pandemic. The state has long had annual net domestic outmigration, but the pandemic-era migration gap was as large as the early 1990s gap that occurred when defense and aerospace contractors downsized after the end of the Cold War. As we discuss in an upcoming report, this pandemic-era outmigration was especially pronounced among workers in highly remote occupations.
California Continues to Lose Taxpayers to Other States, But Pandemic Outmigration Has Eased. Recently released 2023 IRS data show that pandemic-era outmigration has eased, though it remains elevated by historical standards. In 2023, 390,000 people moved to California from other states while 590,000 moved out, for a net domestic outmigration of 200,000. (The IRS data cover only federal income tax filers, so a small share of movers is excluded.) Net outmigration is about one-third below pandemic-era peaks and only modestly elevated compared to 2017–2019. More timely American Community Survey data suggest outmigration slowed further in 2024.
Outmigration Rates, Historically Even Across Income Groups, Were Highest Among Upper-income Taxfilers During the Pandemic. Historically, the net domestic migration rate—that is, the number of migrating taxpayers as a share of all taxpayers in their income class—was relatively even across income groups. (Most taxpayers are in the lower- and middle-income groups, meaning the total number of migrating taxpayers was higher in these groups despite similar rates across groups.) During the pandemic, however, outmigration rates were much higher among upper-income taxpayers, peaking at 1.7 percent of all taxpayers with incomes above $200,000 in 2022. With the newly released 2023 data, the trend has largely reverted to its historical norm.
With Outmigration Easing, State Revenue Consequences Also Lessened. In the years leading up to the pandemic, forgone state personal income tax (PIT) collections associated with net outmigration were about half a percent of total PIT revenue each year. This share increased as net outmigration surged. Forgone tax collections due to net outmigration peaked at 1.6 percent of 2022-23 PIT revenue, three times higher (about 1 percentage point) than pre-pandemic levels. Our assessment of the 2023 IRS migration data suggests that net domestic outmigration reduced income tax revenue growth in 2023-24 by nearly $1 billion (0.7 percent).
IRS Migration Data Delays Raise Timeliness Questions. The IRS has released migration data with increasing delays in recent years. Previously, data arrived roughly 15 months after the tax year, but the 2022 data took 19 months and the 2023 data took 28 months. These delays limit the value of IRS migration data for tracking current trends, making it more useful as a historical benchmark against timelier sources like the American Community Survey.