Tax Flight Accelerates in Massachusetts: $4.18 Billion in AGI Lost to Other States After Surtax

BY MICHAEL NORTON

Opponents of the surtax on wealthier households say new IRS data points to an increase in adjusted gross income leaving to other states, with Massachusetts ranking behind only California, New York and Illinois in that “tax flight” metric.

The Pioneer Institute said the numbers show Massachusetts’s net loss of AGI to other states grew from roughly $900 million in 2012 to $4.18 billion in 2023, with about half of all outbound filers moving to either Florida or New Hampshire. Massachusetts lost 16,464 net tax filers and 29,870 net individuals in 2023, the institute said, noting federal policy changes have “shut off immigrant labor” after years during which international immigration helped Massachusetts to more than offset domestic losses. The institute says the numbers should sharpen the state’s focus on competitiveness policies.

Asked about the surtax last year, Gov. Maura Healey said she wanted to evaluate what’s going on and to see the numbers on potential out-migration. Asked about it on WBZ-TV this Sunday, Healey talked about getting the “best return on investment” from surtax spending on transportation and education, and about her efforts to address housing, health care and energy costs.

“It’s an interesting time right now because while we talk about costs, our population has grown here by 120,000 people over the last three years,” Healey said. “We do have some people leaving, and there are different reasons for that. As governor, I want to make sure that we are doing everything as a state to make Massachusetts the place you want to come to, the place you want to raise a family and grow a business.”

Healey added, “I think we’ve got to always be looking at our overall tax regime here in Massachusetts, and what do we need to do to make Massachusetts more competitive.”

A Massachusetts Society of CPAs survey report released Tuesday found out-migration remains a concern, especially among higher-income taxpayers. Tax policy, including the 4% surtax, is influencing relocation decisions, 90% of CPAs say; and nearly 70% say hiring is “getting harder, with burnout and rising salary expectations adding pressure.” Surtax supporters seem content with the large amounts of tax revenue the new tax is adding to state coffers, including nearly $3 billion in fiscal year 2025.