IRS data shows Washington state lost 18K people, $1.66B in taxable income in 2021

Washington state saw a net loss of 18,798 taxpayers and their families between calendar years 2021 and 2022, according to Internal Revenue Service migration data released last week. That represents a loss of nearly $1.66 billion of taxable income, although Washington does not have a state income tax.

The Evergreen State’s net loss of taxpayers in that time period was the ninth worst in the nation.

Last year's IRS data showed Washington had net loss of about 14,000 people but gained $200 million in adjusted gross income.

Per last week's IRS figures, 222,533 taxpayers and their dependents left the state, while 203,735 entered the state, accounting for a net loss of nearly 19,000 taxpayers.

The outflow of taxpayers from the Evergreen State represents a loss of $14.62 billion in adjusted gross income, while the inflow represents a gain of $12.96 billion in adjusted gross income. The difference between the two figures accounts for the $1.66 billion loss in taxable income.

In terms of domestic migration, most of Washington’s incoming taxpayers were from California. The data show 44,160 taxpayers and their dependents moved from California to Washington, bringing along with them more than $3.815 billion in adjusted gross income.

Meanwhile, 29,096 did the opposite in moving to California, the most common destination for those leaving Washington, and taking more than $2.97 billion in adjusted gross income with them.

While Washington does not have an income tax, it does have a capital gains tax that charges a 7% levy on the sale or exchange of long-term capital assets, such as stocks, bonds and business interests. The tax does not apply to real estate and only covers gains above $262,000, up from $250,000 for the 2022 tax year, as the floor is tied to inflation.

The Legislature approved the capital gains tax in 2021, and Gov. Jay Inslee signed it into law. It took effect after the state Supreme Court upheld it in a ruling last year, with the first payments due in April 2023.

Initiative 2109 to repeal the capital gains tax is on the ballot this November.

IRS data showed that Florida added 245,334 residents – the most of any state – for a net increase of nearly $36 billion in adjusted gross income due to domestic migration.

At the other end of the spectrum was California, which lost 307,117 taxpaying families worth more than $23 billion in adjusted gross income to other states.