People are fleeing Washington State at unprecedented rates, resulting in huge tax declines

Seattle, Washington – Recent Internal Revenue Service (IRS) data shows that between 2021 and 2022 Washington state’s taxpayer population dropped significantly as well as its taxable revenue. Along with a drop of almost $1.66 billion in taxable revenue, the net loss counted 18,498 people and their families.

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With this outflow, the state ranks as having the ninth biggest national taxpayer loss—a concerning trend given the numbers from past years. This year’s figures reflect a more alarming fiscal outflow than last year’s IRS data, which noted a drop of almost 14,000 individuals but a rise of $200 million in adjusted gross income.

Examining migratory patterns, the IRS found that just 203,735 new taxpayers entered Washington while 222,533 taxpayers left the state. Almost 19,000 taxpayers were lost net from this migration. The financial impact is clear: those departing carried $14.62 billion in adjusted gross income; in contrast, arriving taxpayers brought in $12.96 billion, resulting in a $1.66 billion gap.

What comes as a surprise is the fact that Washington remained a preferred destination for Californians even with the general drop. According to the records, 44,160 Californian taxpayers moved to Washington carrying over $3.815 billion in adjusted gross income. But with 29,096 taxpayers bringing more than $2.97 billion with them, California also proved to be the most sought-after location for Washingtonians leaving.

Credit: Deposit Photos

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Washington state is popular since it does not impose a state income tax, which would usually draw in people. It does, however, levy a capital gains tax, which the state Supreme Court maintained last year upon introduction in 2021. Not relevant to real estate transactions, this tax—which includes a 7% levy on the sale or exchange of long-term capital assets exceeding $262,000—is linked to inflation.

While citizens and legislators consider these changes, Initiative 2109—which seeks to eliminate the capital gains tax—will show up on the ballot this November. The result could have a major influence on state migration patterns as well as future budgetary policies.

On a more general level, IRS data also indicated national migration trends whereby Florida became the largest gainer, adding 245,334 residents and over $36 billion in modified gross income. California witnessed the most notable migration on the other side, losing almost 307,117 taxpayers with adjusted gross income flowing out of the state totaling more than $23 billion.

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These numbers show continuous changes in the demographic and economic environments all throughout the United States, shaped by elements from living expenses to tax laws to work possibilities. States like Washington will keep tackling these difficulties; the choices voters make this November could provide significant direction for the future.