In the United States of Inequality, Arizona Ranks High

Posted by Bob Lord

The Economic Policy Institute is out with a study that looks at inequality in America state-by-state: The Increasingly Unequal States of America: Income Inequality by State, 1917 to 2011.

So, how does Arizona rank? All in all, it's one of the more unequal states, but the data don't suggest there's any pernicious reason for that. The worst statistic for Arizona is that 84.2% of our income growth between 1979 and 2007 went to the top 1%. Only four states, Nevada, Wyoming, Michigan and Alaska, did worse. In each of those states, 100% of the income growth went to the top 1%.

If you're seeking to break into the top 1% in your state, Arizona is a good place to be, because its threshold for the top 1% income group is only $267,667, lower than all but 10 of the other states. 

In terms of percentage of total income going to the top 1%, we're at exactly 20.0% as of 2007. That places us at 12th worst. The worst are Wyoming, Connecticut, New York, Nevada and Florida, ranging from a 28% share to a 33.4% share of income going to the top.

Do the data really tell us anything? Perhaps. On the surface, there is no apparent correlation between governmental policy at the state level and the states' statistical outcomes. The largest driver of inequality for a state seems to be whether it has places rich people like to live, not anything it does policy-wise. California, New York, Washington and Texas all show relatively high levels of inequality, even though two are high tax states and two are low tax states. The only states that have places where the rich like to live and are relatively low in inequality are Maryland and Virginia, but that may be attributable to their proximity to DC and the large number of well-paying middle class jobs in the area.

So, the takeaway it seems is that high income earners really are not that sensitive to income tax rates. The rich people who live in Seattle live there because they like Seattle, not because Washington lacks a state income tax, or so it seems. The rich people who prefer a city that never sleeps live in New York, despite its relatively high tax rates.