America's richest states see their tax revenue plunge

Some of the richest US states are seeing sharp declines in their tax revenues, while others are making gains, as demographic shifts and differences in tax policies fuel diverging trends across the country.

New York and California, which both rely heavily on taxing the incomes of their wealthiest residents, saw tax receipts plunge in the 2023 fiscal year through April, according to Urban Institute data obtained by DailyMail.com.

Meanwhile, Texas and Florida, which rely primarily on sales taxes, saw healthy growth in tax receipts, after both states made population gains and consumer spending remained strong. 

'You're starting to see this divergence,' Emily Mandel, an economist at Moody's Analytics, told Bloomberg News. 'It's definitely something we're seeing in the data.'

After running several years of huge budget surpluses as stock markets boomed, California has seen the sharpest drop-off in tax receipts, with a decline of 24.9 percent from the same period last year.

New York and California are seeing sharp declines in their tax revenues, while other states are making gains, as demographic shifts and differences in tax policies fuel diverging trends

California Governor Gavin Newsom is seen above. After running several years of huge budget surpluses as stock markets boomed, California has seen the sharpest drop-off in tax receipts

New York was close behind, with a decline in tax revenue of 19.5 percent, after personal income tax receipts in the Empire State dropped by nearly a third.

In all, 17 states reported annual declines in total tax revenue, and nationwide, total state tax revenue was down 5.5 percent. 

The Urban Institute found that the median state saw year-over-year personal income tax revenues for April decline 32.4 percent. 

Personal income tax revenues for the states totaled $57.8 billion in April, which was 43.5 percent lower than one year ago.

Conversely, the states that are less reliant on personal income taxes saw the biggest gains in tax receipts for the period, as state sales tax revenue rose 7.1 percent nationwide.

Alaska, which relies almost solely on taxing energy company revenue, was an outlier, with tax revenue rising 83.2 percent due to rising oil and gas prices.

West Virginia saw tax receipts gain 14.1 percent -- also due mostly to rising corporate income taxes, although personal income and sales tax receipts were also up in the Mountain State. 

New York saw a decline in tax revenue of 19.5 percent. New York Governor Kathy Hochul is seen above

California's budget deficit is expected to reach nearly $32 billion in the coming fiscal year, after the Golden State ran a budget surplus of $55 billion in 2022‑23 

Texas and Florida are the two most populous states without a state personal income tax, and both made healthy gains after seeing an influx of new residents in recent years, driving their sales tax revenue higher.

Tax revenue in Texas rose 12.2 percent for the period, while Florida's gained 9 percent. 

Among the eight states with no personal income tax, all those with data available reported some increase in state revenues this year. (No data was available for Nevada and Washington, which do not tax personal income.) 

The diverging trends appear due in part to economic and tax policy factors, as well as significant population shifts following the COVID-19 pandemic, which saw large migrations out of expensive coastal cities and toward Sun Belt states.

From April 2020 to July 2022, the population of Texas grew by 884,000, or 3 percent, while the Sunshine State added 707,000 residents, representing a gain of 3.3 percent, according to Census data.

During the same period, New York and California, which are likewise among the largest states by population, saw the biggest net decreases in residents, each losing more than 500,000.

The shifts reflect an internal migration of substantial proportions, fueling booming population growth in the South that could have economic and political implications for decades to come.

New York and California have each lost more than half a million people since 2020

A map shows the percentage change in state populations from 2020 to 2022

Experts cite a confluence of factors, including the rise of remote work, pandemic health fears about dense urban areas, and concerns over housing costs, high taxes and crime for driving a flood of internal migration toward Sun Belt states.

As well, California in particular has been hurt by its heavy reliance on taxing the capital gains income of ultra-wealthy residents, a strategy that leads to booms and busts.

In May, Governor Gavin Newsom revealed the state's budget deficit is expected to reach nearly $32 billion in the coming fiscal year, after the Golden State ran a budget surplus of $55 billion in 2022‑23. 

California has a progressive tax system that relies heavily on rich people and taxes investment gains as regular income, meaning it gets about half its revenues from just 1 percent of the population. 

When the economy is good and the stock market surges, the wealthy pay more in taxes and revenues can soar quickly. When the economy is bad, they pay less and revenues can plunge just as fast. 

For most states, the 2022-23 fiscal year ends on Friday, and a new budget cycle begins.