The objective of economic insights is to bridge the gap between the latest economic data and what it means for Delaware businesses.
According to IRS data, Delaware gained $1.42 billion in adjusted gross income (AGI) through migration of households between 1992 and 2014.
The results vary widely across the state, with New Castle County losing AGI from net migration (-$1.5 billion) and Sussex County being a substantial winner ($2.4 billion).
Why is it happening?
Overall households and their AGI are migrating to Delaware from states with higher property, personal income and sales taxes. This includes New Jersey, New York and Pennsylvania. Households are net migrating from Delaware to warmer states with lower or no personal income tax (e.g., Florida, Texas) and states with low taxes and a low cost of living (e.g., North and South Carolina).
The loss of AGI over time due to net outmigration from New Castle County is explained primarily by households with school age children moving to Chester County, Pa., and Cecil County, Md.
At the other end of the spectrum, the substantial gains in AGI from net in-migration in Sussex County is driven by the beach and by Delaware’s tax environment for retirees. Not only does Delaware have low property taxes and no sales tax, Social Security payments are exempt from state personal income taxes and there is a circuit breaker on pension income.
The implications for business?
The impacts on Delaware business from the differences in AGI from net household migration vary substantially by county.
Businesses in New Castle County should adopt strategies to attract customers from the daytime commuters who work in the county but live outside of Delaware. Each year the county sees a net out-flow of over $3 billion of wages earned in the county by out-of-state residents. If effective action is not taken to improve Delaware public education, businesses should consider branch locations in Chester County.
Businesses along the beach in Sussex County are disproportionately dealing with wealthy retirees ages 55 and older from such high-income places of origin as Montgomery and Anne Arundel counties in Md., and Fairfax County, Va. The spending of such households tends towards country clubs and golf, boating, quality health care, full-service restaurants and financial advisors.
There is little prospect at the current time of real reform of public education that would make New Castle County an attractive local for young professionals with children. And the substantial crowding among the Delaware beach communities will lead retirees to nearby locations such as Milton.
John E. Stapleford is the director of the Center for Economic Policy and Analysis for the Caesar Rodney Institute and works as associate director and senior economist with Moody’s Economy.com