And the Winner Is... Florida

Palm Beach County alone has a net positive wealth transfer of +$3B. You’d think they had massive population growth, but it was only 24,500, which is 1.6% population growth. California was the biggest loser at $12B in lost wealth. It's not secret and will be no surprise that the wealth losers had the highest income taxes, and the winners, Florida (+$21B), Texas(+$6B), South Carolina(+$4B), and Tennessee (+$3B). To be fair in reporting, North Carolina (+$4B) has a flat 3.99% income tax, and Arizona (+$3B) has a flat 2.5% income tax.

Annual Change in Adjusted Gross Income Due to Inner-State Moves in 2023

Map: Realtor.com • Source: IRS, Created with Datawrapper

The states with wealth flight are finding themselves in an unrecoverable death spiral.

Here is how it happens.

1. The US government pumps $5 Trillion into the US economy in response to COVID
   1. Americans spend this money, increasing gross receipts income for states
   2. States are flush with covid relief funds
2. State politicians can’t help but increase public programs, and the money will recur year after year.
3. The money is all spent, but now the states cannot meet the spending commitments they obligated themselves to with the federal surplus
4. State income raises taxes to compensate
5. Wealthy people leave, creating a budget shortfall
6. States raise income taxes and any other tax they can get away with

I’m not sure how these states rebound. With so much pressure to spend more and more on top of the already existing unfunded liabilities.

It makes me think there is going to be a huge divide between the have and have-not states.