IRS data show sharp increase in net loss of higher earners from Minnesota

This week, I’ve written about new Internal Revenue Service (IRS) data, which show that Minnesota saw a net loss of 13,455 residents in 2021-2022 and that these losses were seen in every age category.

Minnesota did not see net losses of residents in every income category. Figure 1 breaks down Minnesota’s total net loss of residents for 2021-2022 into seven income categories. We see that our state lost residents, on net, in every single one of them above $25,000 annually. This is, then, not just an exodus of the rich, but is an exodus primarily of the rich: the IRS data show that Minnesota’s biggest losses of residents were among those with incomes above $100,000 annually, though it should be noted that the median income for a family of four in Minnesota is $115,252. By contrast, Minnesota actually saw a net inflow from elsewhere in the United States of residents with incomes under $25,000 annually.

Figure 1: Net migration of individuals to/from Minnesota by income of primary taxpayer, 2021-2022

What is striking is how this has changed. Figure 2 reproduces Figure 1 but adds figures for the average net loss/gain in each category for the years 2011-2012 to 2020-2021. Three things jump out: first, there has been a decline — albeit slight — in the net inflow in the lower income categories; second, the category in which the numbers flip from gain to loss has slipped lower, to “$25k to $50k;” and, third, the net loss of higher earners has increased markedly. Indeed, the net loss in the category “$100k to $200k” jumped to 112% above the average in 2021-2022 and to 142% above it in the category “$200k and over.”

Figure 1: Net migration of individuals to/from Minnesota by income of primary taxpayer

From the standpoint of the state’s economy, this is concerning. If we take income as a proxy for productivity – which is fairly standard in economics, however bad it might smell to the layperson – then Figure 1 is showing us that we are losing more productive workers and partially replacing them with less productive workers and Figure 2 is showing us that this is happening at an increased rate. This will exert a downward pressure on per capita Gross Domestic Product in Minnesota.