Known for its quaint seaports and abundant historic attractions, Connecticut has a lot going for it.
Boasting one of the country’s highest median incomes, the Constitution State’s economy has traditionally been driven by fishing and natural resources, defense manufacturing, and insurance and financial services.
However, according to data from a recent United Van Lines National Movers Study, in 2020 Connecticut experienced nearly twice as many outbound relocations (63%) as inbound ones (37%).
All told, this equated to –
- Nearly 1,200 moves from Connecticut to other states
- Approximately 680 relocations from other states to Connecticut
It’s easy to blame this mass migration on the COVID-19 pandemic and hot-button “red state-blue state” issues, but the trend isn’t a new one.
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Connecticut’s demographics at a glance
Connecticut has just 3.5 million residents, but based on percentages it ranked fourth in move-outs behind New Jersey, Illinois, and New York, and not surprisingly, California was fifth on the list.
According to Data USA, in 2019 –
- Connecticut’s population was approximately 3.6 million
- The median age was 41.2
- The median property value was about $280,000
- The rate of home ownership was about 65%
- Median household income was nearly $79,000 (the sixth highest in the nation)
- Non-Hispanic Caucasians made up about 66% of the population
- African Americans made up about 10% of the population
- Various Hispanic groups collectively accounted for about 14% of the population
- Asians accounted for less than 5% of the population
Why people are leaving Connecticut
In addition to collecting data regarding which states families moved from and to, United Van Lines also asked many of its customers what motivated them to relocate in the first place.
They found that –
- Nearly 33% moved due to a new job or transfer
- Approximately 32% wanted to be closer to friends and family
The data also revealed that especially toward the end of 2020, many former residents’ move decisions were based in part on the fallout from the COVID-19 pandemic.
Of those for whom the pandemic was a factor –
- 60% cited concerns for the health and wellbeing of themselves and their families
- 57% mentioned changes in work status (like being able to work remotely)
- 53% were driven by a desire to improve the overall quality of life
Many respondents fell into more than one of these categories, and though they’re not the only reasons people chose to move, evidence suggests that broader relocation trends have accelerated as a result of the pandemic.
In addition, with the 8th highest median age in the country, it’s no wonder that many elderly and relatively wealthy residents choose to retire to states like Florida and Arizona where the weather is more agreeable and taxes are substantially lower.
Of those who left, about two-thirds were Baby Boomers and Gen-Xers 55-years-old or older, many of whom chose to live in more rural parts of the state as opposed to big cities like Orlando, Miami, and Fort Lauderdale.
High taxes are also driving the exodus
It’s a fact that taxes tend to be higher in blue states like Connecticut, California, and New York than in red states like Texas, Florida, and Arizona.
According to Bankrate, Connecticut’s sales tax is about 6.4%.
By comparison, the national average is about 5.2%, however, on a per capita basis, the state’s individual income tax collections are the third highest in the country.
Since this rate is based on the number of adults residing in the state and isn’t dependent on employment, salary, net worth, or property ownership, it’s a good judge of the overall tax burden – an area in which Connecticut’s residents don’t fare particularly well.
In fact, with a collective burden of about 12.6% when various state and local taxes are taken into account, taxfoundation.org found that as a percentage of income, residents of Connecticut are among the hardest hit.
New York residents’ tax burden typically hovers around 14%, while the national average is just shy of 11%.
Thankfully there’s a silver lining in this dark tax cloud – taxes in New Jersey are even worse.
Credit improvement company Self-determined that the average resident of New Jersey will fork out more than $930,000 in taxes in their lifetime.
Massachusetts comes in second at $827,000, and you guessed it, Connecticut is third at $805,000.
At the bottom of the list is West Virginia at $321,000.
Connecticut’s “death spiral” of debt and taxes
A recent study commissioned by the Connecticut Commission for Economic Growth and Fiscal Stability found that the state has been losing disproportionate numbers of high-earners and entrepreneurs and that they’re being replaced largely by unskilled workers, many of whom earn less than $30,000 annually.
Needless to say, the former group paid more in taxes than the latter, and as a result, the state’s coffers aren’t as full as they once were.
Internal Revenue Service (IRS) data shows that Connecticut experienced a huge drop in taxable income as far back as 2015 when gross revenue declined by more than $2.5 billion.
However, budget deficits began showing up years earlier, resulting in significant tax hikes in both 2009 and 2011.
In 2013 state revenue topped $21.3 billion, but by 2019 it had dropped to just $19.6 billion, a decrease of more than 17% when the figures are adjusted for inflation.
Connecticut’s economy is partly to blame
Despite its small size and population, in 2019 Connecticut’s GDP topped $280 billion, making it the 23rd largest state economy in the country.
This represents just 1.3% of US GDP, but in the last five years, the economy has grown by nearly 7%.
Though 1.4% annual growth isn’t spectacular, it’s not bad considering the state of the nation’s economy, and with defense spending demand for insurance and financial services on the rise, the state’s economy is likely poised for continued growth.
On the flipside, Connecticut’s economy peaked in 2007, and since then it has been relatively anemic.
GDP numbers have remained relatively static for more than a decade, but again these numbers are misleading because during that same period inflation has increased by nearly 19%, which means that in real terms GDP has dropped drastically.
Immigration may be skewing the numbers
Ironically, since 2010 Connecticut’s population has remained relatively static.
On the surface, this seems to contradict United’s data, but this isn’t necessarily the case.
The American Immigration Council found that –
- Approximately 15% of Connecticut’s residents were born in another country
- Another 16% are native-born citizens with at least one immigrant parent
Collectively, these folks account for nearly one-third of the state’s population, and in nearly one-quarter of households, English isn’t the primary language spoken.
In addition to being a popular destination for immigrants, of those bucking the trend and moving into Connecticut, many are coming from nearby states like New York and New Jersey, where tax burdens and real estate prices are even higher.
States with the lowest tax burdens
At just slightly over 5%, residents of Alaska enjoy the lowest overall tax burden in the country.
On the downside, bears and sub-zero temperatures are common, and everything from groceries and healthcare to housing and insulated boots are much more expensive than they are in the lower 48.
Featuring low property taxes and no state income tax, Tennesseans’ total tax burden is just 5.7%.
At approximately $52,000, the median household income is about 20% lower than the national average, but the overall cost of living is among the lowest in the country as well.
With an average tax burden of just 6.1%, cowboys revel in the fact that they keep more of their hard-earned dollars than those who live in states like California, Connecticut, and New York.
Though the First State has a high-income tax, it doesn’t have state or local sales tax, which is why savvy residents from neighboring states like Maryland and Pennsylvania often make large purchases there.
Delaware’s tax burden of approximately 6.2% is the fourth lowest in the country.
Rounding out the top five in New Hampshire, with a total tax burden of about 6.8%.
But be warned, though there’s no state income tax in New Hampshire, residents pay the highest property taxes in the US.
Frequently asked questions (faqs)
What states are people moving to?
In recent years, states like Idaho, Oregon, South Carolina, Arizona, and South Dakota have experienced the most inbound moves.
Why are people leaving Connecticut?
The top reasons people are leaving Connecticut include COVID-19 related health concerns, changes in work status, retirement, and the desire for a better overall quality of life.
Which states have no personal income tax?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no personal income taxes.
Which states have the lowest costs of living?
Mississippi has the lowest cost of living in the United States. Other cheap states include Oklahoma, Arkansas, New Mexico, Kansas, Georgia, Alabama, and Missouri.
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