Money is Stampeding into Florida But Trickling into South Carolina…Palmetto State Must Cut Income Tax to Compete
Over ten years ago, Travis Brown wrote How Money Walks: How $2 trillion Moved Between States, and Why it Matters. In the foreword, legendary economist Dr. Art Laffer summarized it as a study of “the migration of working wealth as a direct result of personal income tax rates…”
- Based on IRS tax return data, Brown showed that from 1995-2010, $86.4 billion in Adjusted Gross Income (AGI) migrated into Florida. (AGI is a taxpayer’s gross income minus certain adjustments to income.)
- Brown also found very little wealth flowed out of Florida. Once arrived, it stayed there.
How do we know the locus and direction of these income flows? Because the IRS collects your address. If a filer moves from Ohio to South Carolina, the IRS knows it…and if the IRS knows it, it is often public information.
Hence, we know how (and where) money walks.
Unfortunately, How Money Walks was a one and done project. Brown has not updated it since 2013. But the National Taxpayers Union Foundation has. We now have data through 2020 with newer data on the way.
So, the burning question: how did South Carolina do versus Florida?
Here is what NTUF found:
- From 2019 to 2020, South Carolina picked up AGI of over $4 billion, earning us a ranking of #6 in money walking in.
- We don’t have the source of this largess by state yet, but How Money Walks showed that the money flowing into the Palmetto State was primarily coming from New York, New Jersey, Ohio, Pennsylvania, and North Carolina. (The latter being folks who naturally cross state lines. Some South Carolina wealth flowed into North Carolina as well.)
- The South Carolina counties enjoying most of this infusion were predictable: Charleston, Greenville, Beaufort, and Horry.
Table 1: Net Change in Returns, Individuals, and Adjusted Gross Income (AGI) by State, Tax Year 2019 to 2020
| State | Net Returns | Net Individuals | Net AGI (thousands of $) | TF State/Local Tax Burden Rank (FY 2022) 1=best |
| Florida | +128,228 | +255,834 | +$39,187,045 | 11 |
| Texas | +82,842 | +174,866 | +$10,901,303 | 6 |
| Nevada | +12,026 | +18,728 | +$4,617,504 | 18 |
| North Carolina | +40,828 | +76,720 | +$4,543,641 | 23 |
| Arizona | +32,636 | +57,075 | +$4,439,302 | 15 |
| South Carolina | +29,981 | +64,724 | +$4,193,460 | 9 |
| Tennessee | +30,292 | +62,015 | +$4,145,718 | 3 |
| Idaho | +14,081 | +31,821 | +$2,153,211 | 29 |
| Colorado | +5,868 | -4,213 | +$2,123,323 | 19 |
| Utah | +6,965 | +12,960 | +$1,639,756 | 40 |
South Carolina gap to Florida in Net AGI? About $35 billion.
Please note that Table 1 is stated in actual dollars flowing in, not per capita dollars. So, on a per capita basis, here is that Top Ten list along with the 2022 Tax Foundation state and local tax burden calculation.
Table 3: Net AGI Gained Per Resident, 2020
State | AGI Gained Per Person | TF State/Local Tax Burden Rank (FY 2022) 1=best |
Florida | +$1,815 | 11 |
Nevada | +$1,482 | 18 |
Idaho | +$1,164 | 29 |
New Hampshire | +$1,062 | 16 |
Montana | +$1,022 | 27 |
Wyoming | +$949 | 2 |
South Carolina | +$817 | 9 |
Delaware | +$801 | 42 |
Maine | +$677 | 41 |
Arizona | +$618 | 15 |
South Carolina gap to Florida in Net AGI gained per person? About $1,000.
Table 6: Change in Net AGI Gained Between 2018 and 2020 Among Top 10 Net AGI Winners in 2020
State | 2020 Net AGI (thousands of $) | 2019 Net AGI (thousands of $) | 2018 Net AGI (thousands of $) | 2018-2020 Net AGI (thousands of $) | % Change 2019-2020 | % Change 2018-2020 |
Florida | +$39,187,045 | +$23,677,598 | +$17,487,784 | +$80,352,427 | +65.50% | +124.08% |
Texas | +$10,901,303 | +$6,346,965 | +$3,906,027 | +$21,154,295 | +71.76% | +179.09% |
Nevada | +$4,617,504 | +$2,619,471 | +$2,031,097 | +$9,268,072 | +76.28% | +127.34% |
North Carolina | +$4,543,641 | +$3,644,174 | +$2,752,119 | +$10,939,934 | +24.68% | +65.10% |
Arizona | +$4,439,302 | +$4,800,358 | +$3,679,004 | +$12,918,664 | -7.52% | +20.67% |
South Carolina | +$4,193,460 | +$3,585,618 | +$2,560,880 | +$10,339,958 | +16.95% | +63.75% |
Tennessee | +$4,145,718 | +$2,642,938 | +$1,887,791 | +$8,676,447 | +56.86% | +119.61% |
Idaho | +$2,153,211 | +$2,054,013 | +$1,229,986 | +$5,437,210 | +4.83% | +75.06% |
Colorado | +$2,123,323 | +$2,321,646 | +$1,987,777 | +$6,432,746 | -8.54% | +6.82% |
Utah | +$1,639,756 | +$1,260,634 | +$686,793 | +$3,587,183 | +30.07% | +138.76% |
Total | +$77,944,263 | +$52,953,415 | +$38,209,258 | +$169,106,936 | +47.19% | +103.99% |
South Carolina gap to Florida in net change in AGI 2018-2020? About 60%.
And finally, the state income tax rate for that Top Ten and whether the state uses Federal Taxable Income (5 states in the US), Federal Adjusted Gross Income (32 states) or a state definition of income (5 states)
State | AGI Gained Per Person | Top State Income Tax Rate/Basis |
Florida | +$1,815 | 0 |
Nevada | +$1,482 | 0 |
Idaho | +$1,164 | 5.8%/FTI |
New Hampshire | +$1,062 | 3% (only interest & dividends only) |
Montana | +$1,022 | 5.9%/FAGI |
Wyoming | +$949 | 0 |
South Carolina | +$817 | 6.2%/FTI |
Delaware | +$801 | 6.6%/FAGI |
Maine | +$677 | 7.15%/FAGI |
Arizona | +$618 | 2.5%/FAGI |
South Carolina gap to Florida in tax rate? 6.2%
Conclusion
The conclusion is this: South Carolina is in a good spot for economic growth, but the Palmetto State will never be in a position to compete with the national leader in wealth transfer—Florida—unless we address our state individual income tax. It must be lower and flatter if we are to compete for money currently stampeding into Florida in droves.
Postscript
There is the inevitable question of the top ten states that are losing wealth. Those are (in order) California, New York, Illinois, Massachusetts, New Jersey, Ohio, Pennsylvania, Virginia, Maryland and Minnesota.
All of those states have a Blue Trifecta (meaning that the Governor, the Senate and the House are all Democratic) except for Ohio (Red Trifecta), Pennsylvania (Republican Senate), and Virginia (Republican Governor; Democratic legislature).
Of that $86.4 billion that migrated into Florida (1995-2010), $16.8 billion came out of New York and $10.2 billion shifted from New Jesey for a total of $27 billion or $1.8 billion each year flowing from NY/NJ to FL. Meanwhile, in New York, $58.6 billion flowed out to other states during that 15-year period.
