A Pioneer Institute study released on Tuesday shows that Massachusetts lost $10.6 billion in adjusted gross income (AGI) to net out-migration between 2020 and 2022, more in those three years alone than the $10 billion it lost from 2012 to 2019.
In all, the Commonwealth experienced a four-fold increase in AGI loss from 2012 to 2022, according to a new study published by Pioneer Institute.
The net loss of taxpayers followed a similar pattern, rising from just over 6,000 in 2012 to more than 26,000 in 2022.
“It’s imperative that states losing residents and employers assess what’s going wrong and seek to right the ship,” said Aidan Enright, Economic Research Associate at Pioneer Institute and author of “Mass Out-Migration: Outflow of Wealth and Residents Continues.”
Massachusetts rose from ninth among the states in net out-migration of AGI in 2019 to fifth in 2022.
The study finds that an important reason for the outflow of people and wealth is that Massachusetts is one of the most expensive places in the country to live, with an acute housing shortage, high tax rates and expensive healthcare.
While 21 states reduced income taxes in 2021 and 2022, Massachusetts voters adopted a 4 percent surtax on annual incomes over $1 million.
In 2023, Massachusetts adopted a modest tax reform package that reduced the short-term capital gains tax rate and increased the threshold for the state’s estate tax. Neighboring states Connecticut and Vermont significantly raised their estate tax thresholds, while Massachusetts still has the third lowest threshold in the country at $2 million. The federal tax only applies to estates worth more than $12.9 million.
“There’s no fixing the outflow of talent and capital without decisive action from state leaders,” said Pioneer Executive Director Jim Stergios. “Other states aren’t waiting—they’ve stepped up their game dramatically. A legislative delegation recently visited Toronto, which has 240 cranes in the sky. To keep up, we need to bring our A-game on taxes, housing, healthcare, and childcare. Once people and money walk out the door, they’re not coming back.”
Decades of underproduction of housing units and high construction costs have led to the number of households in Greater Boston growing faster than the number of new housing units. According to the U.S. Census Bureau, Massachusetts had the fifth fewest new residential construction permits authorized per capita in 2023.
In terms of age groups, the most significant loss of AGI was among those aged 55-64, but it was closely followed by the 26-34-year-olds who make up the foundation of the Commonwealth’s future tax base.
About 60 percent of the AGI loss from net out-migration went to New Hampshire and Florida. As young people seek to start families, they find that the median price of a home is $486,000 in New Hampshire and $399,000 in Florida, both more than 25 percent below the Commonwealth’s median of $635,000.
In terms of housing, Enright recommends reforming minimum lot size regulations to allow for smaller lots and setting design standards in local zoning codes to make approvals more administrative than discretionary, thereby reducing the length of the approval process.
On the tax front he calls for further increasing the minimum threshold for the estate tax and enacting additional reductions to the short-term capital gains tax rate.
