Analysis shows Iowa was following national trends in 2021.
Public policy decisions have consequences, as is evident when viewing IRS data on the number of individuals who move and establish residency in new states each year. While some states like California and Illinois are experiencing an oversized exodus, Iowa did not have a huge gain or loss from domestic migration in 2021. But even as Iowa held relatively steady (62,000 tax filers left Iowa in 2021, while 61,000 people moved in) it is important to examine our state’s trends.
The IRS data includes the number of income tax returns, the number of individuals, and the adjusted gross income (AGI) reported by those taxpayers. While many will focus on the outflow numbers alone, we feel it is important to look at the net migration figures, meaning taking into consideration both inflow and outflow. The following are our main findings.
The net impact of domestic migration was a loss of 1,188 individuals. Those choosing to leave Iowa took nearly $260 million in income with them, highlighting why it is so important that Iowa continues to improve its tax and business climate.
When examining migration's direct impact on Iowa, considering nationwide trends can be helpful to identify any unique outliers for our state. On a national scale, domestic migration trends demonstrate that California, Nebraska, and Illinois are net out migration states while Arizona, Texas and Florida are all net in migration states. This means Iowa is closely following the national trends when it comes to migration.
Speculation can lead us to some conclusions of why people are moving from these states. Many believe California’s high tax and cost of living environment are contributing to their out migration. While other states like Florida and Texas have the draw of zero income tax, a warm climate, and an affordable cost of living.
None of these explanations are grounded in concrete data (yet). However, policymakers need to be aware in today’s economy that many of the decisions they make can make a difference as states are more in competition with each other than ever before. We cannot control Iowa’s geography nor the weather, but we can control other things like taxes and regulations.
Some of the 2021 migration data could still be the result of moves associated with the pandemic. As more data is released in future years, coupled with a tax code that is constantly improving, we will hopefully have a better understanding of what is driving migration into and out of Iowa.