IRS Data and Cost-of-Living Index Highlight U.S. Migration Trends

2026-07-17

The BareStory

Recently released federal tax and cost-of-living data highlight an ongoing shift in where Americans choose to reside, driven largely by housing costs and state tax rates. According to the Missouri Economic Research and Information Center (MERIC) quarterly Cost of Living Index, Hawaii ranks as the most expensive state in the nation, followed by Massachusetts, Alaska, California, and New York. Conversely, Oklahoma was identified as the most affordable state, followed by Alabama, Mississippi, Kansas, and West Virginia.

MERIC reported that housing is the primary driver of these regional affordability differences. In response to these conditions, Internal Revenue Service (IRS) data shows that the top ten counties with the largest net losses of taxpayers to other states were all located in California and New York. Los Angeles County experienced the greatest migration outflow, losing a net total of 17,496 tax filers who took nearly $1.9 billion in adjusted gross income with them. Other counties with significant taxpayer losses included Queens, the Bronx, Orange, Suffolk, San Diego, Nassau, Riverside, San Bernardino, and Kings.

Conversely, the counties experiencing the largest net gains in interstate tax filers were Maricopa County in Arizona, Harris County in Texas, King County in Washington, and Clark County in Nevada. A unique trend occurred in Manhattan, New York, which gained more interstate tax filers than any other U.S. county but still lost nearly $1 billion in adjusted gross income, indicating that the incoming residents earned less than those who departed.

Economists and housing advocates suggest these migration patterns are reshaping state economies, tax bases, and real estate markets. E.J. Antoni, a chief economist at the Heritage Foundation, and Paul Teller, a conservative strategist, both claimed that residents are relocating from high-tax, highly regulated states to areas with lower taxes and lower costs of living. Jim Tobin of the National Association of Home Builders stated that Southern states are leading the nation's housing growth by focusing on development, infrastructure, and job creation.

Left Perspective

Shielding Vulnerable Living Standards
Exposing High-Earner Capital Flight
Prioritizing Managed Urban Density

Right Perspective

Incentivizing Capital and Production
Voting With Their Feet
Engine of Supply-Side Growth

Left Perspective

• Shielding Vulnerable Living Standards Social equity begins with access to affordable shelter, making housing costs the ultimate metric of a functioning community. The MERIC data identifying Hawaii, Massachusetts, and California as the least affordable states highlights a systemic failure to protect working-class residents from predatory real estate markets. When housing costs force families out of their communities, it represents a failure of state-level social safety nets rather than a rejection of progressive governance.

• Exposing High-Earner Capital Flight Tax justice demands that those who benefit most from a state's infrastructure contribute proportionally to its upkeep. The IRS data showing Manhattan gaining residents but losing $1 billion in adjusted gross income reveals that wealthy individuals are abandoning their civic obligations to seek tax havens. This concentration of departing wealth exposes how mobile capital can undermine public services, leaving lower-income incoming residents to bear the burden of funding essential infrastructure.

• Prioritizing Managed Urban Density Unchecked development and outward urban sprawl threaten environmental protections and long-term climate resilience. While Southern states boast rapid housing growth, this expansion often occurs at the expense of sustainable urban planning and labor protections. True prosperity is not measured by the sheer volume of rapid construction, but by creating stable, regulated, and equitable housing markets that prevent displacement without sacrificing environmental standards.

Right Perspective

• Incentivizing Capital and Production Economic vitality relies on low tax burdens and regulatory restraint to foster investment and retain productive citizens. The loss of $1.9 billion in adjusted gross income from Los Angeles County demonstrates that high-tax, highly regulated environments inevitably repel wealth creators and businesses. Capital will always migrate to jurisdictions that respect private property and allow individuals to keep more of what they earn.

• Voting With Their Feet The market is a highly efficient mechanism for signaling policy preferences, and domestic migration is the ultimate feedback loop for state governments. The massive influx of tax filers into Maricopa, Harris, and Clark counties proves that taxpayers actively choose fiscal discipline and lower costs of living over government expansion. States that refuse to curb spending and lower taxes will continue to suffer eroding tax bases as productive citizens seek economic freedom elsewhere.

• Engine of Supply-Side Growth The housing shortages plaguing coastal states are direct consequences of artificial barriers like zoning restrictions and excessive building regulations. The housing growth in Southern states, driven by a focus on development, infrastructure, and job creation, demonstrates that freeing the supply side of the economy is the only sustainable way to lower costs. By incentivizing construction and reducing bureaucratic red tape, states can naturally lower prices through market competition rather than state subsidies.

How it may affect me

As a U.S. reader:

• If you live in highly regulated, high-tax states like California or New York, you may face ongoing high housing costs that could prompt you to relocate to more affordable states like Oklahoma, Alabama, or Mississippi.

• If you reside in counties experiencing massive taxpayer outflows, such as Los Angeles, Queens, or Nassau, you may experience a strain on local public services and infrastructure as departing wealthy residents reduce the local tax base.

• If you live in rapidly growing destination areas like Maricopa County in Arizona or Harris County in Texas, you may see an increase in housing development, infrastructure projects, and job creation, but potentially also face challenges related to rapid outward urban sprawl.

IRS Data and Cost-of-Living Index Highlight U.S. Migration Trends

The BareStory

Left Perspective

Right Perspective

How it may affect me

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