The exodus of wealthy Americans from traditionally affluent states like California and New York is accelerating, as high-income earners seek refuge in states with lower taxes and a more affordable cost of living.
Once the go-to destinations for the rich and powerful, the Golden State and the Empire State are now experiencing a significant net loss of residents with six-figure salaries, according to a recent study by SmartAsset.
The research, which analyzed the latest IRS data from the 2021-2022 tax year, reveals a stunning shift in migration patterns among high-income earners. California, long associated with glitz and glamour, saw a net outflow of 24,670 high-earners, each boasting an average adjusted gross income (AGI) of $1.3 million. Meanwhile, New York, another historic hub for wealth, lost 12,040 high-earners with an average AGI of $1.1 million. These numbers paint a clear picture: the ultra-wealthy are packing their bags and heading to greener, or perhaps more accurately, less-taxed pastures.
So, where are these high-income households going, and why? The answer lies in a combination of tax incentives, cost of living, and quality of life. The top destinations for these wealthy migrants are states that offer a friendlier tax environment and more affordable housing. Leading the charge are Florida and Texas, both of which are known for their lack of state income tax—a significant draw for those looking to keep more of their hard-earned money.
Florida stands out as the most popular destination, with a net inflow of 29,771 high-earning households. The Sunshine State’s appeal is no mystery. With zero state income tax, year-round warm weather, and a booming real estate market, Florida offers a compelling alternative to the high-tax environments of California and New York. The average high-earner moving to Florida is trading in the high cost of living and heavy tax burden of their former home for a more financially favorable lifestyle.
Texas, another major low-tax haven, saw a net inflow of 8,260 high-earning households. Like Florida, Texas offers the dual benefits of no state income tax and a relatively affordable housing market. According to Zillow’s June 2024 data, the median home sale price in Texas is $342,167, a far cry from California’s median of $746,667 and even lower than New York’s $450,000. For wealthy individuals looking to maximize their earnings and investments, the Lone Star State presents an attractive option.
But the migration of high-income earners isn’t limited to these two tax-friendly giants. The Carolinas are also becoming hot spots for those fleeing the financial pressures of California and New York. North Carolina welcomed 5,792 new high-earning households, while South Carolina saw an influx of 5,270. The appeal of these states goes beyond just taxes; they offer a lower cost of living, mild weather, and a high quality of life. Median home prices in North Carolina and South Carolina are $341,500 and $317,833, respectively—well below the national average, making homeownership more accessible for new residents.
Arizona rounds out the list of top destinations, with a net inflow of 4,365 high-earning households. The state’s warm climate, growing economy, and recent implementation of a flat income tax rate of 2.50% have made it an increasingly attractive option for those looking to escape the high-tax states. With its bustling urban centers and scenic desert landscapes, Arizona offers a blend of economic opportunity and lifestyle that resonates with high-income earners.
This migration trend underscores a broader shift in priorities among America’s wealthy. While states like California and New York have long been synonymous with wealth, the high cost of living, coupled with increasingly burdensome taxes, has made them less desirable for those who want to preserve their wealth. For many, the promise of lower taxes, more affordable housing, and a better quality of life outweighs the prestige of living in a traditional hotspot.
The data makes it clear: the wealthiest Americans are voting with their feet. As home prices and mortgage rates remain elevated across the country, states with lower costs and favorable tax environments are seeing an influx of high-income earners eager to make the most of their money. For those considering a move, following in the footsteps of these wealthy migrants could be a wise financial decision.
In a time when economic uncertainty is the norm, the migration of high-income earners to states like Florida, Texas, and the Carolinas signals a growing awareness of the importance of financial efficiency. As more and more of America’s wealthy leave behind the high taxes and sky-high real estate prices of California and New York, it’s clear that the tides are shifting. The question now is whether the policymakers in these traditional powerhouses will take notice and make changes before the exodus becomes a full-blown stampede.
