Tax Flight Accelerates In Massachusetts

The data coming out of Massachusetts confirms exactly what I have been warning about for years. You cannot raise taxes on a shrinking base and expect the system to hold together. According to new IRS migration data, the state lost roughly $4.18 billion in adjusted gross income to other states in 2023, a dramatic increase from about $900 million a decade earlier. This came immediately after the implementation of a 4% surtax on income over $1 million, a policy sold as a way to fund education and infrastructure but which has instead accelerated the exit of high-income earners.

What stands out is not just the number of people leaving, but who is leaving. High earners now account for about 70% of the outbound income, meaning the very group being targeted for revenue is the one walking out the door. That is the fatal flaw in these policies. Governments assume the wealthy are trapped. They are not. Capital is mobile, and when you create an environment that penalizes productivity, investment, and success, it simply relocates.

About half of those leaving Massachusetts are heading to states like Florida and New Hampshire, jurisdictions that impose far lower tax burdens or none at all on income. This is not random movement. This is deliberate. People are voting with their feet, and more importantly, they are taking their income, businesses, and long-term investment potential with them. The idea that you can isolate taxation within state borders without consequence is simply false.

This is part of a broader trend across the United States. High-tax states are experiencing outflows, while low-tax states are absorbing both people and capital. I have said repeatedly that governments do not seem to understand that capital flows are the dominant force, not policy intentions. You can pass whatever legislation you want, but if confidence declines and the environment becomes hostile to wealth creation, the money leaves. It is that simple.

The real danger is what happens next. As the tax base shrinks, governments are forced to extract more from those who remain to maintain spending levels. One analyst put it bluntly: “We are trying to make money on a smaller tax base. It’s going to be harder.” That is the spiral. First, taxes rise. Then capital leaves. Then taxes must rise again to compensate. It becomes a self-reinforcing cycle that ultimately undermines the entire fiscal structure.

Massachusetts is now a case study in what happens when policymakers ignore these dynamics. They are collecting billions in new surtax revenue, yet simultaneously losing billions in taxable income. That is not success. That is cannibalization of the future for short-term gain.

This ties directly into what I have warned about regarding state-level fiscal crises. Governments assume they can control behavior through taxation, but they cannot control confidence. Once people begin to question whether a state is competitive, whether it is worth staying, whether their future is better elsewhere, the shift begins. It does not happen all at once, but once it starts, it is very difficult to reverse.

What Massachusetts is experiencing today is not isolated. It is a warning sign. The same policies being debated in California, New York, and other states will produce the same outcome. Capital does not stay where it is punished. It moves to where it is treated best. That is the fundamental rule governments continue to ignore, and until they understand that, this trend will only accelerate.