Tennessee among top states drawing wealthier relocating Americans

Tennessee's median household income is nearly 15% below the U.S. average, but the Volunteer State is drawing a disproportionate number of wealthy families relocating to Tennessee, according to tax records.

A new study by the personal finance website SmartAssets found that Tennessee was among the top six states in attracting relocating families with households incomes above $100,000 in the year before the coronavirus pandemic hit the economy in 2020.

"Tennessee does not tax wages and earnings, meaning that upper middle-income class earners may be able to increase their savings rate," said Stephanie Horan, a mortgage, savings and retirement expert for SmartAssets.

About 11,200 upper-middle-class people moved to Tennessee between 2018 and 2019, while less than 7,800 left Tennessee. In total, the net migration of upper middle-class people in Tennessee was 3,409.

Former Reagan administration economist Arthur Laffer, who moved to Nashville in 2006 in part to capitalize on lower taxes and cheaper costs, said his tax savings alone nearly paid for his move from California.

Laffer, the father of so-called "supply-side economics," insists his new home proves his philosophy that lower taxes and regulations promote more growth.

"If you want a good model for growth, look to Tennessee," Laffer said.

Tax filers with higher adjusted gross incomes tend to move less than those with less money, IRS data show. Horan said the wealthy may move less due to various reasons, including that taxpayers in higher income brackets often skew older or are more established in their careers.

Regardless of the cause, IRS migration data shows about 3% of taxpayers with adjusted gross incomes between $10,000 and $50,000 moved to a different state in 2019, compared with just 2.26% of taxpayers with adjusted incomes between $100,000 and $200,000 who moved across state lines that year.

ON THE MOVE

Though higher earners may be less likely to move states overall, some states have still seen relatively large influxes. The top states where upper-middle class people moved to the most in 2019 were:

1. Florida

2. Texas

3. Arizona

4. North Carolina

5. South Carolina

6. Tennessee

7. Washington

8. Idaho

9. Nevada

10. Colorado

Source: SmartAssets "States Where the Upper-Middle Class Is Moving." Georgia ranked No. 11 and Alabama placed No. 14 in the study. The worst states for migration of wealthy people into the state in 209 were, in order, California, New York and Illinois.

- Compiled by Dave Flessner

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