The Economic Policy Institute, a liberal think tank from Washington DC, recently released a report detailing the income levels of the top one percent across different states. This report aims to spotlight the growing income disparity between the rich and the poor, a trend that has only deepened over the decades. Here, I’ll summarize their findings and add some of my thoughts on the matter.
Top One Percent Income Levels By State:
In 2024, you need to earn at least $652,657 to be in the top one percent in America. This threshold varies by state, with the highest incomes predominantly found on the East and West Coasts. For instance, Connecticut leads with $954K, followed by Massachusetts at $903K, and California at $844K. The northeastern states, notably around Manhattan, show high income thresholds due to their dense concentration of financial services.
Five Key Takeaways:
1. East Coast Dominance: The wealthiest states are mainly on the coasts, reflecting the large financial centers and industries located there. States like Massachusetts and DC also show high thresholds due to their educational institutions and government-related industries.
2. Variability Across States: States like Hawaii and others in the lower rankings offer a different picture. Despite its beauty, Hawaii ranks 40th with a top one percent threshold of about $490K, likely due to its high cost of living and limited industrial diversity.
3. Impact of Natural Resources: States rich in natural resources, like North Dakota, have higher income thresholds, influenced by industries like oil. However, these can fluctuate with market changes such as recent declines in oil prices.
4. No Income Tax Advantage: Texas and other states without a personal income tax offer appealing prospects for high earners. For example, Texas has a top one percent threshold of $600K. Moving to or retiring in these states can be financially beneficial due to tax savings.
5. Inflation’s Impact: The national average needed to enter the top one percent has risen significantly from $380,000 in 2014 to over $650,000 today, highlighting the harsh impact of inflation. This emphasizes the need for aggressive saving and investing to maintain purchasing power.
Further Observations:
– Income Concentration: Since the 1980s, there’s been a stark increase in income concentration within the top one percent, paralleling advancements in technology that facilitate asset accumulation.
– Lifestyle and Geographic Mobility: The data suggests that strategic relocation can significantly impact earnings. For instance, earning in high-income states and retiring in no-tax states can optimize financial outcomes.
– Real Estate and Investment Opportunities: Real estate remains a preferred avenue for building wealth, with platforms like Fundrise offering accessible investment opportunities in diversified real estate.
– Private Equity and Growth Companies: The wealthiest often increase their fortunes through business ownership and investments in private companies. Platforms that offer investments in private growth sectors like AI and fintech provide avenues for substantial financial growth.
This report not only highlights the disparities in income across states but also underscores the importance of location, industry, and investment strategy in achieving financial success. The data is a call to action for both policymakers and individuals to consider how best to manage and capitalize on their income potential.
