The COVID-19 pandemic prompted a massive reevaluation of living situations among millions of Americans, resulting in a significant shift in the economic landscape of the United States. A recent analysis of tax data conducted by the Economic Innovation Group (EIG), shared exclusively with Axios, sheds light on how these changes have impacted the financial dynamics of various cities and regions across the country.

The analysis highlights the challenges faced by some of America’s major cities in their efforts to rebuild their economies after the pandemic. Notably, the data showcases a surge in income in rural areas, exurban communities, and popular vacation destinations. The migration of residents from major cities wasn’t just limited to population numbers; it disproportionately affected higher-income individuals, intensifying the economic impact on local economies.

Cities experienced varying degrees of decline in adjusted gross income as a share of taxable income for those who remained. San Francisco saw a 20% drop from 2020 to 2021, while Manhattan experienced a 13% decrease, and Boston, an 11% decline. High earners were leaving these cities, with out-migrants from San Francisco and Manhattan reporting average taxable incomes of $240,000 and $134,000, respectively.

The largest percentage increase in income due to migration occurred in Walton County, Florida, where there was a remarkable 51.6% surge. Other significant income surges were observed in Collier County, Florida (+31.4%), Pitkin County, Colorado (+27.4%), and Summit County, Utah (+34.9%).

The economic dependency of cities on residents’ incomes is far-reaching. Income taxes significantly contribute to municipal revenue in cities such as Washington, D.C., and New York. However, even areas without county-level income taxes rely on residents’ incomes to support housing markets, retail sales, and tax bases.

Connor O’Brien, the analyst behind the EIG study, expressed surprise at the scale of urban income flight, noting that high earners have become more mobile while others remain grounded. O’Brien highlighted the positive impact on rural areas, which saw an unexpected influx of income, particularly in regions not traditionally known for entrepreneurship and investment.

The analysis is based on 2021 data, providing a snapshot of the pandemic’s initial effects. Although the trend appears to have eased in 2022, experts suggest that the underlying shifts may persist, influencing the ongoing transformation of America’s economic landscape. As the nation navigates these changes, attention to the evolving relationship between income geography and urban-rural dynamics will be crucial in shaping future policy decisions and economic strategies.

By Impact Lab