Written by Darren McCorkle and Johnny Le
The large migration of America’s population base from the northern half of the country down to sunnier climes – from the Rustbelt to the Sunbelt – is a well-known phenomenon, with Florida being one of the biggest beneficiaries of this trend. In the decade between 2000 and 2010 Florida’s population grew 18%, with the previous two decades having an even more pronounced growth. But people aren’t the only thing that’s moving, money is moving here too.
Source: Howmoneywalks.com
Many states in the southern half of the country have benefited immensely from this wealth migration, particularly the southern Atlantic Seaboard, Texas, and many of the states in the Southwest, as the map above shows. None, however, has benefited nearly as much as Florida. Between 1992 and 2010 Florida saw an increase in annual adjusted gross income due to wealth migration of $95.61 billion. This is just shy of the AGI increase during the same period as the next four states combined: Arizona ($28.3 billion); North Carolina ($25.1 billion); Texas ($24.9 billion); and Nevada (18.2 billion).
Perhaps just as telling as the amount of money coming in to Florida is where it is coming from, and the answer is seemingly just about everywhere. Of the six states in bright red on the map above – California, Illinois, Michigan, Ohio, New York, and New Jersey – only California didn’t have Florida as the number one state they lost wealth to. Of the other five states on this list, Florida was at the number one spot, often by a factor of 4 or 5 over the next highest state. New York and New Jersey – or in other words the New York City metro area – was an especially large part of this total, combined accounting for almost a third of Florida’s wealth gain. Moreover almost every state in the eastern half of the country (east of the Minnesota/Louisiana line) has lost wealth to Florida – even if their net gain was positive over all. So what accounts for this? Our beautiful weather and high quality of life are of course part of the reason. But a large amount of credit must also be paid to one of the two great certainties in life: taxes.
There is no escaping the IRS, of course, but when it comes to state taxes Florida has a number of distinct advantages that make it extremely attractive. One is its relatively low State Corporate Income tax rate, as demonstrated by the graph below.
Income Tax Among States
Florida has a state corporate income tax of 5.5%. This places it at 9th among the 36 states that have a flat corporate income tax rate and well below the median of 6.9%. This of course makes Florida extremely appealing to companies, especially since few of the states with lower flat rates could be considered Sunbelt states: South Carolina and possibly Colorado. So when a company in Chicago, with its 9.5% state corporate tax rate decides to move, Florida looks like a very appealing choice: warm, sunny, and less taxes!
Perhaps more significant than the low corporate tax rate, however, is Florida’s state Personal Income Tax: 0%. It is one of only seven states that can boast this, with other notables being Texas and Nevada, which as you might remember are two of the other top five states in terms of wealth migration. This low personal income tax is a large draw for many people, especially the wealthy, from high tax areas. In our real estate practice we have seen an ever increasing group of investors who are fleeing the high personal tax rate states such as Wisconsin, Minnesota, New York, etc. Combined with Federal taxes and often with city taxes, these folks have marginal tax rates well over 50%. This was, along with the low corporate tax rate discussed above, certainly a motivating factor for the big Hertz corporate move to Southwest Florida.
The state of Florida, and especially our own Collier County, has been a tremendous beneficiary of the movement of population – and wealth – to the Sunbelt, and we certainly hope this trend continues! We can do very little about the weather, of course, except trust that it will continue to be a draw to people from all over the country. But we can have an effect on the tax strategy of the state to ensure that Florida continues to be an appealing place for individuals and companies to bring their money.
| Darren McCorkle Sales Associate and Commercial Specialist Premier Commercial, Inc., Licensed Real Estate Brokers Direct: 239.213.7223 Cell: 239.207.8668 darren@premiermail.net | Johnny Le Licensed Sales Associate Premier Commercial, Inc., Licensed Real Estate Brokers Direct: 239.213.7317 Cell: 321.278.3051 johnny@premiermail.net |