This is why the high earnings are leaving New York and California

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Could you save money by moving to another state?


Key points

  • New York and California have lost nearly 40,000 high-income people, but those states are still key places for people who make a lot of money.
  • Remote working has made it more possible for people to move to low-cost states.
  • Relocating can reduce living costs, but it’s not a move to be taken lightly.

Data from the IRS shows that the country’s top incomes are moving away from New York and California. Some are heading to states with lower state taxes. But taxes aren’t the only reason for the change. So how many people have left these popular states, what’s driving them away and should you follow suit?

New York and California have lost nearly 40,000 high-income people

The top income bracket of the IRS includes anyone earning $ 200,000 or more, and its data shows that nearly a quarter of them live in California and New York. Both states rank in the top three nationally in terms of the number of high-wage residents. In fact, despite the contraction, there are still over 2 million high-income families in California and New York combined.

The California exodus

Over 36,000 money-making families left California between 2019 and 2020. This was offset by around 17,500 arrivals. Overall, that means there are now more than 19,000 fewer high-income families in the Golden State. While this is a lot of starts, it still accounts for only 1.35% of the total number of top earners in the state.

The New York Exodus

New York faces an even bigger struggle to keep its best earnings. Nearly 30,000 high-income families have left the state and only about 9,600 have arrived, a net loss of nearly 20,000. This is about 3% of the best filers in New York.

Here is a summary of the IRS data on high-income households in California and New York between 2019 and 2020:

State

Total high-income families

High-earning starts

You arrive high-earning

Net exchange

California

1,423 million

36,751

17,522

– 19,229

New York

628.497

29,562

9,650

– 19,919

Data source: IRS.gov

Because the best earnings are leaving California and New York

There are various reasons why higher incomes are moving out of California and New York, but high tax rates in both states certainly play a role. According to the Tax Foundation, California residents pay up to 13.3% and New York residents could pay up to 10.9%. The Manhattan Institute said that New York City’s highest incomes pay the highest combined state and local income taxes in the United States

Conversely, states such as Florida and Texas, which do not charge state income tax, are attracting more and more senior workers. Between 2019 and 2020, Florida saw a net gain of over 20,000 high-income, while Texas earned over 5,000.

Another factor is that international immigration to New York City is about a quarter of the level it was before the pandemic, according to the New York Times. In addition to that, sadly the death rate was much higher than in typical years. In California, several large companies, such as Oracle, Palantir, and Hewlett-Packard Enterprise, are moving their operations – and their people – elsewhere.

There are other pandemic problems at play as well. Remote working is increasingly feasible, which means that many workers no longer have to live within an easy commute from their office. Not only is urban life no longer as necessary as it once was, but for some people it has also lost its charm. The ability to work remotely for at least part of the week allows you to explore different ways of living. All of these things combined mean that both high-income and other Americans are considering relocation.

Bottom line

Some experts argue that recent migration data is a weakness rather than a trend, particularly as New York and California are home to even more billionaires than anywhere else in the country. However, if you are looking to reduce the cost of living, moving to another state or city could help. But there are many factors to consider. Here are just a few:

  • Removal expenses: If you are moving to reduce the cost of living, calculate how long you will need to stay in your new place to balance those extra costs. Let’s say the move costs you $ 5,000 and the shift will save you $ 500 a month. You will need to be there for at least 10 months before the move pays off.
  • Health care: Your current health insurance may not work in a new state, so check what options are available and how much it will cost in the state you may be moving to.
  • Opera: If you’re planning on keeping your current job and working remotely, it’s probably a good idea to make sure your employer is on board. You don’t want to move to another state only to find that you are in demand in the full-time office. If you are hoping to find a new job, examine the job market and what opportunities may be available.
  • Schools: If you have children, there are a number of extra considerations. For example, where could they go to school and how family-friendly is your potential new home?
  • Housing expenses: Home prices, rental costs, and even mortgage rates can vary greatly depending on where you live. Use a cost of living calculator to find out if the places you’re considering will actually save you money.

Moving out of state can be a major upheaval, particularly if you currently live near close friends and family. You may be able to drastically reduce your living expenses, but you may also find that some savings are offset by new and unexpected costs. The more time you spend visiting and researching your new location, the more likely it is that any move will be rewarding for both your bank account and your personal life.

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