The United States Shuffle

Scale your financial life with Fjell Capital - it is our goal to guide your financial life forward at any stage of life.

New IRS data showed that New York and California lost over $90 billion in income during COVID (2020-2021). Attribution of the $90 billion came from high earners relocating to lower income tax states. North Dakota just eliminated income tax in the lowest tax bracket, and dropped rates in higher bracket.

New York state lost $25 billion in adjusted gross income due to outmigration in 2021, on top of $20 billion lost in 2020. California reported a net loss of $29 billion in 2021, following a loss of $18 billion in 2020. Combined, the two states lost $92 billion across the two years.

And I’m sure you can guess the winners, Florida and Texas. Florida brought in 128k new households and $39 billion in new income in 2021 alone, up from the $28 billion gain in 2020. Texas brought in $11 billion in new income, mostly from California movers.

The demographics of the US has now shuffled. Who stayed and who went, and what does that mean for the new state inflows. These are my assumptions:

Retirees stayed, because of deeper roots, lower income, and a better tax situation in general.
35-55 year-olds moved out, especially if they had high income (which is generally accompanied by a college degree).
And people under 35 may have either just moved their or would be moving out, because of career, school, and broader opportunity.

When you think of tax attribution a lot comes from property taxes (both from commercial and residential), income, and sales tax. Local governments (including cities) collect most from property taxes, while state taxes broadly come from income and sales taxes.

Who makes up that tax attribution, its the people buying clothing for their children, buying a larger home or their first home, and earning a high income. Those people leaving make property values decline, corporations leave, and retail sales decrease. The prime age middle class is the tax base.

There are now more filled jobs in Florida, more new construction, more new businesses, and more economic gain.

Now the billion dollar question, because I am sure that the people reading this will be either democrats or republicans and will want to know the impact on the 2024 election as that heats up.

Right off the bat to note. I don’t think income taxes will increase, people don’t notice property and sales as much as they notice the deduction from their paycheck. In the midterms Florida held a republican majority and California held a democrat majority.

I hear plenty of worries about this migration bringing western or northern ideologies down to Texas and Florida and screwing up the very reason they came. But I think the movers will go to bat and keep the area the way it is and was because they moved for those reasons.

Texas and Florida will simply experience greater economic and demographic benefits than destruction.

Anyways here’s everything I read, wrote, and spoke this week.

Scale your financial life with Fjell Capital - get a dedicated team, 3 meetings a year, unlimited phone calls, texts, and emails, an annual progress report, meetings designed around our 29 foundations, and professional asset management.

Join the 900+ subscribers reading Running the Tape every week!

Thank you! Your submission has been received!

Oops! Something went wrong while submitting the form.

Connect with me on social media!