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Massachusetts millionaires took $4.2 billion in income out of the state in 2023, according to new Internal Revenue Service data (1).

As reported by Bloomberg, that’s an 8% increase from the year before, and it comes just as the state began enforcing a new 4% surtax on incomes above $1 million.

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The levy, approved by voters in 2022, was designed to raise money for schools and transportation (2). So far, it’s delivered, generating more than $6 billion in revenue.

But the outflow of income raises a new question: Are higher taxes on the wealthy boosting state revenue or quietly shrinking the tax base over time?

Massachusetts’ “millionaire tax” has been a financial success on paper. At the same time, however, billions of dollars in income are flowing out.

In 2023 alone, residents who left Massachusetts took a net $4.2 billion in adjusted gross income with them. Adjusted gross income (AGI) is a measure of total income after some deductions. The IRS uses that data to track how income moves between states.

While the billion figure is substantial, it’s not new. Income outflows from the state have been occurring for years, and were actually higher in 2021.

The number of people leaving has also declined. The total number of outgoing tax returns fell by around 36% year-over-year, suggesting fewer households are relocating overall.

Higher-income households are now accounting for a larger share of total departures from the state. In 2023, top earners accounted for roughly 70% of total income outflow. That doubles their share from just a few years earlier.

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The issue lies not in the volume of people moving out of Massachusetts, but the concentration of wealth amongst those who do leave.

Even a relatively small number of high earners can move significant sums of money.

To put it into perspective, if 1,000 middle-income earners making $80,000 a year relocate, that represents about $80 million in income leaving the state. But if just 100 individuals earning $5 million annually move, that figure leaps to $500 million.

In other words, the tax base is more sensitive to who leaves, not necessarily the number of people leaving.

Many of the high-income households leaving Massachusetts are relocating to lower-tax states like Florida and New Hampshire, according to Bloomberg.

Both states offer significant tax advantages. Florida has no state income tax, while New Hampshire does not tax earned income or capital gains (3, 4).

For high earners, those differences can translate into substantial savings, especially over time.

That’s why relocation decisions at higher income levels are often driven by financial considerations rather than lifestyle alone, according to Tax Foundation (5).

Massachusetts isn’t alone in targeting top earners.

Several Democrat-led states are exploring similar policies as they look for ways to fund public spending and offset shifting federal support.

California, for example, has debated a potential wealth tax, while Washington recently enacted its own tax on high-income individuals (6).

But Massachusetts’ experience highlights the tradeoff at the center of that strategy: How to raise more revenue without encouraging the very taxpayers generating it to leave.

While most Americans aren’t deciding where to live based on a million-dollar tax threshold, decisions around income timing, investment strategy and tax exposure can still have a meaningful impact on long-term wealth.

That said, tax strategies are incredibly personal, and there’s no one-size-fits-all solution for every household.

That’s why some Americans turn to platforms like Advisor.com, which connects users with licensed financial professionals who can help build a plan tailored to their goals.

Advisor makes it simple to speak with licensed financial professionals in your area who can provide personalized guidance, including ways to potentially lower your tax burden.

Beyond tax planning, a professional advisor can also help you determine how many years you have left to invest before retirement, and assess your comfort level with market fluctuations — two key factors in building the right asset mix for your portfolio.

Even better, you can schedule a free, no-obligation consultation to discuss your financial plans and see if Advisor.com’s pick is right for you.

When you look at how ultra-wealthy investors handle taxes, it’s usually not just about filling out forms once a year. They treat tax season as part of the overall strategy.

They don’t simply report income. They look for ways to soften big gains, place certain investments in more tax-friendly accounts and plan withdrawals carefully.

At higher income levels, one missed deduction or poorly timed move isn’t small. It could cost thousands of dollars.

High-income households can work with platforms like Range to reduce their tax burden.

Range is a streamlined, cost-effective way to manage your entire financial life. They offer tax recommendations based on your prior returns, and can evaluate your investment portfolios for tax loss harvesting opportunities, too.

Beyond taxes, Range also offers investment advisory services. While traditional advisors can charge fees from 0.5% to 2% of your total assets under management (AUM), or between $1,000 to $3,000+ for more comprehensive plans, Range offers flat-fee pricing with 0% AUM fees. That’s a fraction of what you’d pay with a typical CFP.

You can even book a free demo with the Range team after answering a few quick questions to see if their expertise matches your portfolio.

For households with more complex finances or higher levels of investable assets, those considerations can become even more important.

At that level, financial planning often extends beyond basic investing decisions to include strategies around taxes, retirement accounts and long-term wealth preservation.

One approach some Americans explore is using tax-advantaged accounts more strategically.

For seasoned investors with portfolios of $50K or more, that could include diversifying through a flat-fee self-directed retirement account.

A self-directed retirement account is a tax-advantaged individual retirement account (IRA) that lets investors allocate funds to a broader range of alternative assets than typical IRAs offered by banks or brokerage firms.

With IRA Financial, you can work directly with experienced retirement specialists or manage their accounts through an online platform and mobile app. The company also offers in-house tax support to help ensure investments remain compliant with IRS rules.

With over $5 billion in retirement assets under custody, guaranteed IRA audit protection, 25,000+ clients nationwide and a 97% client retention rate, IRA Financial can help you grow your retirement fund with alternative assets.

Simply answer a few questions — including the kinds of assets you would like to invest in and how much you’d like to start with — to prequalify for an account in just 90 seconds.

Massachusetts’ experience highlights a growing issue nationwide.

On one hand, taxes on high earners can generate billions in revenue to fund public priorities. On the other hand, even small shifts in where top earners choose to live, or how they structure their finances, can have an outsized impact on a state’s tax base.

Wealth, in many ways, behaves differently from wages or population. It’s a mobile, flexible thing.

As more states explore similar policies, that balancing act is likely to become more important.

For individuals, the takeaway is less about where to move and more about how to plan. While tax policy can change from year to year, the long-term outcome often depends on the decisions you make around your investments and overall financial strategy.

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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

Bloomberg (1); Secretary of the Commonwealth of Massachusetts (2); State of Florida.com (3); New Hampshire Department of Business and Economic Affairs (4); Tax Foundation (5); GeekWire (6)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.