Wealthy residents are leaving the District in droves, according to a new IRS report.

The District lost almost twice as many residents making $200,000 or more per year as it gained from 2020 to 2022, the latest year for which figures are available, the federal tax collection agency said.

The District’s 2-to-1 loss ratio of high-earners was slightly less severe for District residents age 65 and up, the demographic group that dominates the top end of the tax bracket, with older taxpayers leaving at a 4-to-3 clip in 2022.

---

---

The new statistics are part of a July 29 update to the IRS’s population migration report.

The erosion of a key component of the city’s tax base comes as District leaders are weighing massive tax hikes to help fill a projected $700 million budget shortfall for the fiscal year that begins Oct. 1.

Chris Edwards, a fiscal policy analyst for the libertarian CATO Institute, said the less-affluent taxpayers in their 20s and 30s moving into the District won’t be able to replace the tax revenue the city raked in from more wealthy residents.

“Jurisdictions lose a lot when they lose high earners,” said Mr. Edwards, who has written about interstate migration for the District-based think tank.. “They lose people who are entrepreneurs, people who are job creators, people who support charitable foundations and charitable projects. While the left demonizes higher earners and the wealthy, they actually do a lot for communities in general.”

D.C.’s Office of Revenue Analysis published a study last fall that found most people who left the city from 2019 to 2021 were early to mid-career.

More than 13,000 people between the ages of 26 to 44 moved out of the nation’s capital during that time period. More than 2,700 of those former residents were bringing home at least $200,000 per year.

The Office of Revenue Analysis backed Mr. Edwards’ assertion as well: those leaving the city had higher average incomes than the new residents coming in.

The District’s own study found that the city lost $3 billion in net taxable income during those two years.

Adding insult to injury was the nugget that $1.2 billion worth of the tax base moved just across the borders to either Maryland or Virginia.

The exact reason for the outflow of high earners was harder to pin down.

Daniel Burge, the economic policy director for the D.C Policy Center, said everything from better jobs and schools to more housing options and lower taxes plays a role.

Mr. Burge also pointed out that wealthier households have more resources to move in general.

Once remote work took off during the COVID-19 pandemic, he said it’s likely that dynamic shift gave “a number of people greater freedom to live farther away from their workplace.”

Mr. Edwards said aggressive income taxes like the District’s can be a major influence on a wage-earner’s decision to move.

For example, the CATO scholar said net migration is up in the income tax-free states of South Dakota and New Hampshire, despite both states having cold-weather climates and lacking major city centers.

The District has a graduated individual income tax, with rates ranging from 4% to 10.75%, along with an 8.25% corporate income tax rate, and generally ranks, with California and New York, as one of the most heavily taxed jurisdictions in the U.S., according to the Tax Federation, another District-based think tank.

Morgan Knull, a longtime real estate agent in the D.C. area, said there is no one specific cause for why people are leaving, but he suggested there’s a sense of fatigue from how local governance has operated in recent years.

He said young professionals with money, in particular, are deciding to vamoose from the District when the chance arises.

“I would be more curious if it was just some people leaving because of COVID and the BLM riots and general incompetence of the D.C. Council. I mean, that is a thing,” Mr. Knull said. “People have just decided that they don’t want to live in the District anymore.”

The IRS study comes as city leaders are eyeing tax hikes to address a projected shortfall in the District’s upcoming annual budget.

Mayor Muriel Bowser and the D.C. Council have agreed that tax hikes are needed, but are at odds over the scope of those proposed increases.

Ms. Bowser refused last month to sign the council’s approved budget, which raises payroll and property taxes.

Her own plan called for higher hotel and electric vehicle taxes combined with the elimination of several resident-friendly tax credits. The mayor further sought to cut climate-related investments, stipends for early childhood teachers and legal assistance.

Ms. Bowser argued that the council’s $21 billion budget is “unsustainable” and will mean even higher taxes and greater service cuts down the road.

But Chairman Phil Mendelson said the mayor’s suggested cuts affect programs helping “the last, the lost, and the least,” while the council’s proposal focuses more on social welfare spending.

That includes funding for 165 additional housing vouchers for people at risk of eviction and the creation of a new child tax credit.

The council did fully fund the Metropolitan Police Department’s budget request and backed spending on a new jail and construction of a new youth recreation center adjacent to the RFK Stadium site.

Congress now has the final say on whether the council’s full budget takes effect or an emergency budget kicks in.

The 30-day time period for federal lawmakers to review the budget is set to expire next week. The District’s new fiscal year begins Oct. 1.