High-earning Americans flock to Idaho and Montana

High-earning Americans flock to Idaho and Montana

The Exodus of High-Income Earners: Where Are They Going?

In a surprising twist, high-income earners are flocking to states out west, but not necessarily to California. According to financial technology company SmartAsset, Idaho, Montana, and Florida are experiencing the fastest population-adjusted growth rates of high-earning households, defined as those with an adjusted gross income of $200,000 or more¹. This migration trend has important implications for state finances and highlights the unique appeal of certain states.

Florida emerges as the clear winner in terms of raw numbers, with a net migration of over 27,500 high-earners². This means that more than 40,000 individuals with high incomes moved into Florida, while only around 12,500 left. One of the key factors contributing to Florida’s appeal is its lack of income tax. Additionally, its desirable weather and abundant business opportunities have attracted many to relocate. In fact, recent data from the US Census Bureau reveals that nearly 675,000 people migrated to Florida in 2021, making it the top destination among all states³.

Idaho has also experienced a significant influx of high-earners, particularly to cities like Boise and Meridian⁴. This upward trend can be attributed to Idaho’s favorable ranking in the Best States Ranking by US News, which takes into account factors such as economy, education, and healthcare⁵. Furthermore, Idaho’s low taxes, strong employment and GDP growth, and supportive regulatory environment have attracted not only entrepreneurs but also leaders in agriculture, manufacturing, and technology.

Texas follows closely behind with a net migration of around 9,000 high-earners, while North Carolina recorded over 5,400 net migrations⁶. The Southeastern states, including South Carolina, Tennessee, and Georgia, have become increasingly popular due to their favorable climates and expanding job markets, as well as the lingering impacts of the pandemic.

On the other hand, California and New York have experienced significant outflows of high-earning individuals. California alone witnessed a net migration loss of over 27,300 high-earners, while New York reported a loss of nearly 20,000⁷. In fact, California’s net outflow of high-earners grew by 40% compared to the previous year⁸. These outflows can be attributed to various factors, including the high cost of living, rising taxes, and challenging business environments.

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Illinois, Massachusetts, and New Jersey also saw major net outflows of high-earners, with the latter two states having over 10% of their tax filers earning more than $200,000 per year⁹. Surprisingly, even Washington, DC, which is not a state but rather a federal district, experienced a faster rate of high-earner outflows compared to any state¹⁰. These outflows underscore the shifting priorities and preferences of high-earning individuals.

This trend of high-income earners relocating comes at a time when the US economy is experiencing significant growth. The Bureau of Economic Analysis recently announced that real GDP in the second quarter of the year grew at an annualized rate of 2.4%, surpassing the growth rate of the first quarter¹¹. This surge in economic activity has led to an increase in new business creation, with a 7% year-over-year growth in applications to start hiring employees during the first half of 2023, according to the Economic Innovation Group¹². Additionally, business owners have witnessed improvements in sales and profit margins during this period.

One notable driver behind the relocations is the booming factory construction across the country, particularly in the Southeast and the West. This growth can be attributed to initiatives such as the CHIPS Act and Inflation Reduction Act, which have stimulated manufacturing construction and attracted high-earning individuals to these regions¹³.

While California and New York may be losing some of their top earners, other cities such as Boise, Bozeman, and Billings are emerging as attractive new destinations for high-earning Americans¹⁴. These cities, with their combination of promising job markets, favorable economic conditions, and quality of life, have become beacons of opportunity for those seeking a change of scenery.

In conclusion, the migration patterns of high-income earners reveal a significant shift away from traditional powerhouses like California and New York to emerging destinations in Idaho, Montana, and Florida. This exodus reflects the changing priorities and opportunities sought by individuals with high incomes. It is essential for states to adapt and embrace policies that attract and retain high-earning individuals in order to ensure long-term economic growth and prosperity.

• Florida
• Idaho
• Montana