Rich, young people are leaving California and New York for the Sun Belt.
The young and the rich — considered to be filers aged 26 to 35 and earning $200,000 a year and more — have been moving to Florida and Texas in high numbers, according to a new survey released by SmartAsset, which looked at migration data from the Internal Revenue Service for the tax year 2021.
“High earners can make up a disproportionate amount of tax revenue. For people aged 26 to 35, only 2% of tax returns filed show an income of $200,000 or higher,” Jaclyn DeJohn, managing editor of economic analysis at SmartAsset wrote. “Despite its small size, this cohort actually makes up 16% of the income for this age group — an outsized tax base that can impact local businesses and government revenues.”
New York lost the most young, high earners — it had a net loss of 5,062 — followed by California — with a net loss of 4,995.
Texas and Florida had the highest inflow of high earners, the data found. An influx of high-income earners has implications for the new home state, from an uptick in taxes paid by those migrants to an increasing demand for housing, which could push up the cost of housing for those who follow them.
Florida gained a net of 2,175 high-earning tax filers between the ages of 26 and 35; Texas gained a net of 1,909 high-earning young filers. One reason why these young workers were moving to these states: neither has state-level income taxes.
New Jersey ranked third on SmartAsset’s list as a destination for the young and the rich, gaining a net of 1,048 high-earners within the ages of 26 and 35. While New Jersey has a graduated income tax — where the tax rate increases as income increases — the cost of housing tends to be cheaper in the Garden State than Manhattan which could be one reason why some New Yorkers are making a move across the Hudson River. The median monthly rent in New York City was $3,750 in late August, according to Zillow, versus $2,700 in Jersey City.
Washington State had the highest concentration of young and rich people, the SmartAsset data showed. More than 13% of those making at least $200,000 in Washington were young and aged between 26 and 35. Washington state also does not have an income tax. “Whether it’s compared with the rich population of all ages or the population as a whole, Washington has a disproportionately large number of young rich people,” DeJohn wrote.
However, Washington, D.C. maintains a relative population higher than any U.S. state for young, rich residents. “More than 16% of people making over $200,000 fall into that age bracket,” DeJohn added. Despite that, it still lost nearly 700 high-earning tax filers aged 26 to 35 in 2021, SmartAsset found.
Texas also happens to be one of the states that has held onto its native-born. Around 82% of its overall population that was born in Texas was still living there as of 2021, according to separate research from the Dallas Fed released Tuesday. Texas was followed by North Carolina (75.5%), Georgia (74.2%), California (73%) and Utah (72.9%) in terms of stickiness.
“Sticky states, where the weather is often warmer, tend to offer better economic conditions than non-sticky states,” economists Ana Pranger, Pia Orrenius and Madeline Zavodny wrote in the Dallas Fed report. “These conditions can be in the form of better and more varied job opportunities or less burdensome tax policies.”
At the other end of the spectrum, Wyoming was the least-sticky state, with only 45.2% of natives remaining there, followed by North Dakota (48.6%) and Alaska (48.%), Rhode Island (55.2%) South Dakota (54.2%).
“Without sufficient employment opportunities, native residents may be pushed to other states to seek good jobs. The five stickiest states each recorded above-average job growth between 2010 and 2019, meaning there was less pressure for residents to leave to find work. Four of the five stickiest states also have below average state and local tax burdens. Residents born in low-tax states may be hesitant to move to high-tax states, as the additional obligation will reduce take-home pay and may lower their standard of living.”
“The five stickiest states each recorded above-average job growth between 2010 and 2019, meaning there was less pressure for residents to leave and find work,” the authors added. Additionally, four of the five stickiest states also have below-average state and local tax burdens.
States with several cities are at an advantage also due to the fact that they can provide native residents “with a wider variety of in-state job opportunities and relatively higher wages compared with smaller or less-populous states with fewer urban areas,” the authors said.
“The share of people born in a state and who stay there can provide an important measure of its attractiveness to workers,” Pranger, Orrenius and Zavodny wrote. “The stickiness of native residents is also key to maintaining a stable (or growing) population and workforce, which is vital to economic growth.”