By Charlie Copeland, Director
Center for Analysis of Delaware's Economy & Government Spending
December 22, 2023
Some Delawareans could be retiring or moving to warmer climes; could they also be relocating for other reasons, like better economic opportunities? According to the most recent available data from the US Census Bureau, 31.5% of the outbound migration from Delaware is moving to these three Southeast states: Florida (19.3%), Texas (6.2%), and North Carolina (6.0%).
It turns out that these three states (FL, TX, NC) have had significantly stronger economies over the last 25 years than Delaware. As a result, their residents have gained on and/or surpassed Delaware's average wages, keeping more of their money due to lower taxes, and have far better public schools.
Let's look closer and examine their GDP growth, per capita income levels, local tax environment, and schools.
GDP GROWTH: Delaware vs. the Southeast States
It is clear that the much stronger relative economies found in FL, TX, and NC are a strong reason that Delawareans might choose to move there. These southeastern economies show no signs of slowing down.
Twenty-five years ago, Delaware had a strong GDP relative to these three Southeast states. In 2001, Delaware's GDP trajectory materially changed (see Graph 1.0 below). By 2006, these states marched ahead of Delaware with faster GDP growth. Then, in 2015, the trend accelerated as Delaware's GDP flattened, and these states grew even more rapidly.
Graph 1.0
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PER CAPITA INCOME LEVEL: Delaware vs. the Southeast States
Delaware's Personal Net Income was very high 25 years ago. However, the ensuing economic mismanagement by Delaware's government has degraded our economy. Residents of Texas and Florida now have higher incomes than Delaware residents, making those States more attractive for workers (see Graph 2.0 below).
Also, given the current GDP growth differences, Delaware would continue to trend poorly in worker's wages compared to FL, TX, and NC. Job growth brings higher salaries, and these Southeast states are growing much more rapidly than Delaware.
Graph 2.0
(Source: St. Louis Federal Reserve State CPI data - Per Capita Personal Income in Delaware, Dollars, Annual, Not Seasonally Adjusted)
LOCAL TAX ENVIRONMENT: Delaware vs. the Southeast States
Delaware's tax rates are significantly worse than FL, TX, and NC. Not only do Texans and Floridians make more money than Delawareans, but they get to keep more of it, too. In North Carolina, businesses have a much stronger tax environment, leading to stronger economic growth. Incentives matter.
According to the Tax Foundation's 2024 State's Business Climate Index, Delaware's corporate and individual tax rates are among the highest in the Nation (see Table 1.0 below). This poor tax structure really hurts Delaware compared to the Southeast. Texas might have the nation's 47th worst corporate tax rate, but Delaware is LAST!
Delaware ranks 44th worst in the Nation for individual income taxes - much worse than the three southeast states. North Carolina, at 17th, ranks 27 spots higher, and Florida has NO income tax.
(Note: Some will claim that Delaware has no sales tax - making our taxes better. However, Delaware does have a sales tax - the State has been lying about this for years - called the "gross receipts" tax. It is a sales tax applied to the business and is arguably worse than a straight sales tax.)
Table 1.0: 2024 Business Climate Index (DE vs. FL, TX, NC)
(Source: 2024 Tax Foundation)
PUBLIC SCHOOLS: Delaware vs. the Southeast States
Delaware's failing public school system, as graded by the federal government, means that families could choose to move to FL, TX, and NC due to the better schools there.
Comparing 4th and 8th graders in Delaware to these Southeast states shows that Delaware is dead last in every category except for one where we are next to last (see Graph 3.0 below). In particular, Florida and North Carolina are significantly better than Delaware - full stop.
Graph 3.0
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CONCLUSION
From a previous CRI analysis, we can surmise that most Delaware net inbound migration is made up of retirees - not a population on which to build a strong economy. Now, with this outbound migration analysis, we have concluded that a large portion of Delawareans are moving to the Southeast States of Florida, Texas, and North Carolina, where stronger economies, lower taxes, and better schools exist.
People vote with their feet. Why stay in Delaware, given the greater opportunity elsewhere?