Setting the Record Straight on Illinois Migration
By Allison Flanagan, Research Associate
There is no denying that Illinois loses more residents than it is gains. But is that single migration data point sufficient to justify the argument for or against state tax policy? This FAQ answers some of the questions about migration in Illinois, specifically: who is leaving; where are they going; and how much taxes matter?
What is Migration?
Migration, as referred to in this FAQ, is the movement of people to and from Illinois. Specifically, CTBA analyzed “net migration,” which is made up of two pieces of gross migration: gross in-migration (all the people who move to a place) and gross out-migration (all the people who leave). Net migration is just the difference between those two numbers. Net domestic migration is made up of people moving in and out of the state from other states and excludes foreign migration (people moving to Illinois from abroad or people leaving Illinois to move abroad).
How is Migration Measured?
Migration itself can be measured using U.S. Census data for geographic mobility, or “state-to-state migration flows.” This FAQ uses U.S. Census data to look at trends over time for mobility. U.S. Internal Revenue Service (IRS) data also tracks the movement of people using tax returns. The IRS migration data for the United States are based on year-to-year address changes reported on individual income tax returns filed with the IRS. IRS migration can include a single tax return in which there are dependents. Therefore, IRS data will refer to each tax return as a household as opposed to a person. The IRS also provides county-level migration data.
Lastly, the Illinois Department of Revenue (IDOR) provides detailed tax return data by income range. IDOR does not isolate tax return gains or losses based on migration but shows the total number of tax returns and AGI by income range, which can then be compared year-over-year. IDOR has not yet published 2018 data, and therefore 2018 is not included in the IDOR analyses.
What is Illinois’ Net migration Trend?
A report from KDM Consulting found that Illinois has had net-negative domestic migration for a century. With the exception of one year, 1947, the last time more Americans moved into the state than out of it was 1920.
The KDM report, published in 2016, only had available data through 2014. CTBA continued the analysis of net-domestic migration for Illinois where KDM left off. As seen in Figure 2, the years in which the rate of net-negative migration was at its peak for Illinois was in 2016–2017, when Illinois was in the midst of a budget impasse, and the income tax rate decreased from 5% to 3.75% under Governor Rauner.
The migration rate decreasing when income tax rates went down could provide reasoning that the tax rate had little impact on people’s decision to move; On the contrary, it could also provide reasoning that the lack of budget and investment in core services (education, healthcare, human services, and public safety) had a greater impact on people’s decision to move.
What is the state-level breakdown of migration data?
According to U.S. Census data, in 2018, 206,000 people moved into Illinois from other states, as seen in Figure 3. Highlighted with green are the states that contributed the highest number of gross in-migration to Illinois: California; Florida; Indiana; Iowa; Missouri; Florida; Michigan; New York; Texas; and Wisconsin.
Since 2010, those same nine states highlighted in green in Figure 3 have contributed over 50 percent of the total gross in-migration for Illinois, as seen in Figure 4.
According to U.S. Census data, in 2018, 305,000 people moved out of Illinois to other states, as seen in Figure 5. Highlighted in red are the states that contributed the greatest numbers of gross out-migration from Illinois: Arizona; California; Florida; Indiana; Iowa; Missouri; Michigan; New York; Texas; Wisconsin.
Since 2010, those same nine states highlighted in red in Figure 5 have contributed over 50 percent of the total gross out-migration for Illinois, as seen in Figure 6.
Figure 7 displays the net migration for Illinois for 2018 using U.S. Census data. More people moved out of Illinois to Arizona, Florida, Indiana, Iowa, and Wisconsin than moved from those states into Illinois, as highlighted in orange.
On the other hand, in 2018, more people moved to Illinois from New York, New Jersey, Pennsylvania, Maryland, Idaho, and 12 other states than from Illinois to those states, yielding a positive net migration.
Which Counties Contribute the Most to Migration?
Most newcomers to Illinois head to Cook County followed by the Collar Counties (DuPage, Kane, Lake, and Will Counties). This is displayed in Figure 8. In addition to Cook and the Collar Counties, the border counties of Wisconsin, Iowa, and Missouri also see a higher influx of gross in-migration. Champaign County, which sees high numbers of gross in-migration as well, could be because that is the county where the University of Illinois at Champaign-Urbana is located.
But while people are entering those ten counties at higher rates than the other counties in the state, people are leaving Illinois from those same counties they are moving into Cook County, followed by the Collar Counties. As seen in Figure 9, some border counties of Wisconsin, Iowa, and Missouri follow shortly behind Cook and the Collar counties in the number of people migrating out. Champaign County, where once again, the University of Illinois at Champaign-Urbana is located, also sees a high number of people migrating out.
Figure 10, which excludes Cook County due to a greater negative net migration (14,700) compared to the rest of Illinois, shows net migration by county. Of the 102 counties in Illinois, only 7 had net-positive migration. The remaining 95 counties saw a net-negative migration.
Is Illinois Really Losing Tax Revenue?
Figure 11 shows, based on IRS tax data, how many households moved, and what the Adjusted Gross Income (AGI) was for those households. Between 2017 and 2018, about 100,000 households moved to Illinois, while about 133,000 moved out. Those leaving Illinois had a total AGI of about $12.2 billion, while those moving to Illinois had a total AGI of about $6.6 billion.
That means the net AGI would be a loss of about $5.6 billion. So where is that revenue being lost from?
The Illinois Department of Revenue (IDOR) breaks down some of the revenue data a bit more to analyze what income levels see changes year-over-year. Figure 12 displays the number of tax returns by AGI Range. As can be seen in Figure 12, the change in returns is not as abrupt over the years as certain narratives described and does not seem to adjust one way or another as a result of tax policy changes. In fact, in 2017, when the tax rate increase, there were fewer tax returns filed for low-income households and more income tax returns filed for middle- and high-income households.
To be clear, this data is not singling-out returns for people who are moving in and out of Illinois, but does indicate that there has not been a loss of middle and high-income households, as the unsubstantiated narrative of tax increases leading to mass out-migration often iterates.
The total AGI of the number of tax returns described in Figure 12 has continued to increase for those with income above $25,000. More astonishing, though, is that while the peak distribution of change in tax returns is occurring for income between $100,000 and $150,000, the total change in AGI is occurring at the highest rate for income greater than $1 million.
In other words, as seen in Figure 13, there has been no loss in income to middle- or high-income households, but rather a loss of low-income households. In fact, at income between $100,000 and $150,000, the point of greatest change in the number of returns, the change in returns was nearly 3 times greater than the change in the number of returns for income over $1 million. However, the change in AGI for those households with over $1 million was 15 times greater than households with income between $100,000 and $150,000. So not only are we not seeing a loss in middle- and high-income households as anti-tax narratives are suggesting, but there is a disproportionate growth in income at the top of the income distribution.
How does tax Policy Actually Impact Migration?
Research on the migration of people finds there is no statistically meaningful correlation between a state’s tax policies and the propensity for a family to migrate.[i] Indeed, other factors like proximity to family or a job, housing prices, and even weather are what really matter.
Research by Stanford Professor, Cristobal Young, who has spent the last decade studying migration trends and reported in his book, The Myth of Millionaire Tax Flight, Young found only 2.4 percent of millionaires migrated during 1999 and 2011. 0.3 percent of those who migrated were for tax reasons, only proving that of the population that chooses to relocate, the number that relocate for reasons related to taxes is insignificant to tax policy. Figure 14 displays Young’s finding that the highest migration rates are realized at the lower-income level who are migrating as an attempt to better their lives. This seems to be consistent with the pattern found in returns for Illinois as well.
Additionally, Young found that migration rates actually decreased with age and education, as shown in Figure 15. Those with a master’s degree or higher between the ages of 18–29 had the highest rate of mobility. What Young determined was by middle-age, all groups of education attainment see an alignment of migration around 2 percent, about a decade before peak income level. Millionaires, like other people, value place-specific social capital.
The bottom line is that migration is not common. On average, only 2 percent of U.S. residents moved from one state to another per year from 2010–2018.[ii] In Illinois, that is about the same, which is shown in Figure 1 and Figure 2, where the percent of net migration compared to the population is less than two percent.
What’s the Takeaway?
Every year, more people choose to leave Illinois than choose to move to it. That fact has taken on a lot of weight as each side of the political fence pushes preferred policies.
But what seems like a straightforward problem is actually much more complicated. Illinois has had negative net migration for a century. There was a more significant deterioration in 2016 and 2017 when Illinois was unable to pass a budget and provide core services like education, healthcare, human services, and public safety.
Illinois does not have an unusually high out-migration rate. While it’s of course worth trying to keep people from leaving the state, Illinois is better off focusing on what draws people to a new place: quality education, job opportunity, and housing prices.
And while taxes are a common scapegoat for negative net migration numbers, there is little empirical evidence to suggest that they are what is driving Illinois’ migration problem, at least for the middle- and high-income households.
A special thank you to Kristine Tjia, a former CTBA Research intern, who worked diligently to clean and analyze 8 years of U.S. Census migration patterns for Illinois. Without her assistance, this post would not be possible.
— —
[i] Cristobal Young and Charles Varner, Millionaire Migration and State Taxation of Top Incomes: Evidence from a Natural Experiment (Stanford, CA; June 2011) 257.
[ii] CTBA analysis of U.S. Census State-to-State Migration data (CPS), 2010–2018
