The Great Wealth Migration: The Flow of High-Income Earners Across States

Published: 08-01-23    Category: Insight

MyEListings' markets and economics editor and creates content about global macro events and their impact on US commercial real estate.

A spread-out stack of $100 bills.

High-income earners are moving, and the data on where exactly they're going provides eye-opening insights into the current lifestyle trends of the wealthy. In this analysis, we dive into the intriguing dynamics of wealth migration within the United States, shedding light on the states attracting high-income earners and witnessing an outflow of such wealth.

We've ranked U.S. states based on their net income migration, a critical economic indicator reflecting the movement of high-income earners. This measure culminates several factors, including tax laws, economic prospects, and lifestyle offerings, that collectively sway where high-income earners reside.

States With the Largest Net Positive Tax Income Migration

Here are the states with the most significant net positive inflow of wealth ranked.

Ranking State Net Income Migration
1 Florida $12.4 billion
2 Texas $10.7 billion
3 Arizona $9.4 billion
4 Colorado $8.6 billion
5 North Carolina $7.8 billion
6 South Carolina $7.2 billion
7 Tennessee $6.9 billion
8 Utah $6.7 billion
9 Georgia $6.6 billion

Let's look at states with the largest net negative tax migration next.

States With the Largest Net Negative Tax Income Migration

Here are the states with the most significant net negative outflow of wealth ranked.

Ranking State Net Income Migration
1 California -$343.2 million
2 New York -$299.6 million
3 Illinois -$141.7 million
4 New Jersey -$135 million
5 Massachusetts -$129 million
6 Ohio -$122 million
7 Pennsylvania -$119 million
8 Michigan -$117 million
9 Indiana -$115 million

Next, let's look at wealth migration on a state-by-state level.

State-by-State Migration: The Top Three Net Earners

Many high-income earners have recently relocated to these three states.

#1 – Florida: A Surge in Net Income Migration

Over the past year, the economic spotlight has focused on Florida as it leads the nation in net income migration. High-income earners are increasingly choosing the Sunshine State, reflecting an age-old economic axiom: Money goes where it is treated best.

Florida's appeal to high-income earners is increasingly palpable. It stands out even among low-tax states like Texas, underlining its compelling attributes. The state's financial landscape, myriad growth prospects, and debtor protections present a lucrative proposition for individuals and families with substantial income and assets.

#2 – Texas: Not Far Behind

Texas emerges as a star player in tax income migration, securing the second position among states with the highest positive net income migration. With a whopping $10.7 billion net gain, Texas is a favored destination for high-income earners seeking financial prosperity and tax advantages.

Various unique benefits draw these high net-worth individuals to the Lone Star State. Texas, like Florida, also boasts the absence of personal income tax, a significant lure for those with hefty incomes.

#3 – Arizona: Almost Hits 10 Billion Net Positive Tax Migration

Occupying the third position in the list of states with the highest positive net income migration, Arizona boasts an impressive $9.4 billion net gain. The state's unique combination of beneficial tax structures, thriving business environment, and appealing lifestyle make it an attractive destination for high-income earners.

These fiscal advantages, the state's sun-bathed landscape, and burgeoning opportunities propel the real estate market and stimulate business expansion. As wealth continues to flow into Arizona, the state enjoys a complete cycle of growth and prosperity.

This trend showcases Arizona as a beacon for those seeking financial and lifestyle enhancements in a state offering a compelling blend of the two.

State-by-State Migration: The Top 3 Net Losers

Conversely, these three states are currently seeing the worst net negative tax income migration.

#1 – California

California ranks first among states experiencing the worst net negative tax income migration. With a staggering net loss of $343.2 million, the Golden State is witnessing an outflow of high-income earners.

Despite its numerous attractions, from the booming tech industry and world-class universities to beautiful landscapes and cultural richness, California's high personal income tax rates seem discouraging for many high-wealth individuals. This, coupled with the state's high cost of living, will likely fuel a wealth migration out of California.

These trends affect the state's economy, especially the real estate and job markets. The departure of high-income earners can decrease demand for luxury real estate and potentially affect the commercial real estate sector. It also impacts job creation, as these high-income individuals often play a significant role in business expansion and entrepreneurial activities.

#2 – New York

In the landscape of tax income migration, New York finds itself challenging, ranking second among states with the highest net negative income migration. With a net loss of $299.6 million, New York is experiencing a significant outflow of high-income earners.

Despite being an economic powerhouse and cultural hub, New York's high personal income tax rates and substantial cost of living are significant deterrents for wealthier residents. These factors push high-wealth individuals to seek more financially favorable environments.

#3 – Illinois

As the third state witnessing the worst net negative tax income migration, Illinois is undergoing a significant financial outflow. The state has experienced a net loss of $141.7 million, indicating a trend of high-income earners seeking more tax-favorable environments.

While Illinois is home to a rich cultural scene and a diversified economy, its high tax rates and substantial cost of living present challenges for wealth retention. This financial pressure prompts an exodus of high-wealth individuals seeking better economic landscapes.

This departure of wealth can impact various sectors of Illinois's economy, notably the real estate and job markets. With high-income earners leaving the state, there could be decreased demand for luxury housing and commercial real estate. Furthermore, this outflow could hinder job creation since high-wealth individuals often drive business expansion and innovation.

Migration Patterns Favor Some States Better Than Others

Several factors have influenced these patterns. For example, the absence of personal income tax in Florida is a significant draw for high-wealth individuals. While also devoid of personal income tax, Texas levies higher property taxes to fund public schools.

This difference in tax structures has led to mandated direct transfers from property-wealthy to property-poor districts. Such subtle nuances can decisively sway decisions for those with substantial personal income or property assets.

The trend of tax migration is becoming more pronounced, with wealth gravitating towards regions like Florida and Texas with more accommodating tax policies. The state's tax structure is one of the crucial elements fueling its wealth attraction.

Economic Implications: The Impact on Commercial Real Estate

The wealth migration to these states has profound economic implications, with commercial real estate standing to benefit the most. High-income migrants demand luxury housing, retail spaces, offices, and hospitality venues, potentially leading to rising property values and boosting already-booming construction activity.

Job Market Migration and Commercial Real Estate

In relation to job market migration, relocating high-income individuals often leads to expanding existing businesses or establishing new ones. As a result, the demand for office spaces, co-working spaces, and flex space could see significant growth, further bolstering the commercial real estate sector.

Retirement Migration and Economic Migration: Looking to the Future

Furthermore, this trend could prompt other states to reevaluate their tax policies to retain and attract high-wealth individuals, creating a dynamic interplay between jurisdictions.

Our research unearths the magnetism of certain states, such as Florida, Texas, and Arizona, which have experienced substantial net positive tax income migration. On the flip side, we also highlight states like California, New York, and Illinois, which have seen a concerning outflow of high-income earners due to various factors, including high personal income tax rates and cost of living.

The findings illuminate how economic and fiscal policies at the state level can significantly influence wealth distribution across the U.S. The implications of these migration patterns are profound and far-reaching, affecting various sectors, including commercial real estate and job markets.

Methodology

MyEListing sourced data from the Internal Revenue Service's Statistics of Income Tax Stats - Migration Data. We extracted state-by-state tax migration data, focusing specifically on high-income earners as defined by IRS parameters. Net income migration for each state was calculated by subtracting out-migrants total income from in-migrants total revenue. States were then ranked based on both positive and negative net income migration. This analysis assumes the accuracy of the IRS data and, while it identifies correlations, does not imply causation due to potentially unseen variables.

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