How State Household Income Varies By Income Quartile

Household income varies by state. It’s well known that households in coastal states tend to have higher incomes (and costs of living) than those in the middle of the country. But this information relies heavily on averages, which are skewed by extremely high incomes, or medians, which only show the 50th percentile but neglect differences in low or high incomes. For that reason, I thought it would be worthwhile to examine how household income in each state varies by income quartile (or bottom 1%, bottom 25%, median, top 25%, and top 1%). The following graphs were generated using 2022 pre-tax household income data from DQYDJ.

How Does the Bottom 1% of Household Income Compare by State?

Bottom 1% household income by state, ranked from highest to lowest; West Virginia and below are all at $0

The bottom 1% of household income represents the poorest households in each state. For 30 out of 50 states (plus the District of Columbia), the bottom 1% of households have an income of $0. The state with the highest bottom 1% household income is Minnesota, with an income of $3,803. The rest of the top 5 are Maryland, New Hampshire, Wyoming, and Maine, which all have incomes above $1,500.

How Does the Bottom 25% of Household Income Compare by State?

Bottom 25% household income by state, ranked from highest to lowest

The bottom 25% of household income represents the 25th percentile. Only 25% of households have a lower income. For reference, the poverty line for 2023 (excluding Alaska and Hawaii, which have a higher poverty line) is $14,580 for a 1-person household, plus $5,140 for each additional person (2: $19,720; 3: $24,860; 4: $30,000). This means that a 1-person household earning a 25th percentile income in any state is above the poverty line, but a 4-person household earning a bottom 25% income would be below the poverty line in 9 states.

The state with the lowest 25th percentile household income is Mississippi, with an income of $21,840. It is followed by West Virginia, Alabama, Arkansas, and Louisiana, which all have incomes below $26,000. On the other hand, the state with the highest 25th percentile household income is Maryland with an income of $50,096, more than double the same percentile income in Mississippi, West Virginia, and Alabama. The rest of the top 5 are Utah, Colorado, New Hampshire, and Oregon, which all have incomes above $43,000.

How Does the Median Household Income Compare by State?

Median household income by state, ranked from highest to lowest

The median household income represents the middle income. 50% of households earn less, and 50% earn more. The state with the highest median household income is Maryland, with an income of $97,184. It is followed by the District of Columbia, New Jersey, New Hampshire, and Utah, which all have median incomes above $87,800.

Interestingly, Maryland and New Hampshire are both in the top 4 for bottom 1%, bottom 25%, and median household income, suggesting that lower income households in these states are relatively better off than those in other states. Indeed, these states have the lowest poverty rates in the country. However, keep in mind that this data consists of pre-tax household income. It is possible that high taxes may lower the after-tax income of households in these states. In fact, Maryland does have the 10th highest average effective tax rate, but New Hampshire actually has the 13th lowest average effective tax rate. It is also possible that these states have higher costs of living than other states. Maryland has the 7th highest cost of living, while New Hampshire has the 14th highest, suggesting that expenses are higher in these states than many others.

On the other end of the spectrum, the state with the lowest median household income is West Virginia at $46,519. It is followed by Mississippi, Arkansas, New Mexico, and Kentucky, which all have median incomes below $56,000. Just like at the 25th percentile, the median income in Maryland is more than double the median income in West Virginia and Mississippi, with a gap of more than $50,000. In fact, if a median income household was to move from West Virginia or Mississippi to Maryland or Utah but keep the same income, it would now be below the 25th percentile of household income. This is why 57% of companies provide different salaries based on location, according to the 2022 Pay Clarity Survey. Unsurprisingly, the states with the lowest median household income also tend to have low costs of living. Mississippi actually has the lowest cost of living of any state, and West Virginia has the 9th lowest. This means that households in these states don’t need incomes as high to get by.

How Does the Top 25% of Household Income Compare by State?

Top 25% household income by state, ranked from highest to lowest

The top 25% of household income is the 75th percentile. Only 25% of households earn a higher income. The District of Columbia has the highest 75th percentile household income at $187,500. It is followed by Massachusetts, Maryland, New Jersey, and Virginia, which all have incomes above $152,000. The state with the lowest 75th percentile household income is Mississippi at $89,002. It is followed by Arkansas, West Virginia, Alabama, and New Mexico, which all have incomes below $100,000.

Once again, the highest 75th percentile income is more than double the lowest. Also, it is interesting to note that the median household income in Maryland is higher than the 75th percentile income in Mississippi, Arkansas, and West Virginia, suggesting that there is quite an income imbalance from state to state.

It is also worth noting that the top 3 (the District of Columbia, Massachusetts, and Maryland) also have the most residents with doctorates of any state, suggesting that their high household incomes may be at least partially due to high-paying jobs that require high levels of education.

How Does the Top 1% of Household Income Compare by State?

Top 1% household income by state, ranked from highest to lowest

The top 1% of household income is the 99th percentile, representing the richest households in each state. The District of Columbia has the highest top 1% household income at nearly $1 million ($983,500 to be precise). It is followed by Connecticut, Delaware, Massachusetts, and Virginia, which all have incomes over $750,000.

This is the first time Maryland has fallen out of the top 5, coming in 11th. This means that while the majority of Maryland households have a higher income than similar percentile households in other states, the top 1% of households in Maryland are not as well off as in other states.

On the other hand, Delaware seems to come out of nowhere. For households below the top 1%, their income falls in the middle of the other states, but the richest households have the 3rd highest incomes in the country. This suggests that there is a large gap between the income of the majority of households in Delaware and the richest 1%. Why this is the case is unclear. Delaware has no sales tax and low property taxes, which may be appealing to households with high income, but it has average income taxes.

Households in the District of Columbia are in the top 2 for median income up through the top 1% of income, and households in Massachusetts are similarly in the top 4 for top 25% and top 1% of income. However, they are in the middle of the pack for the bottom 25% of income. This suggests that their richer households are relatively better off than households in other states, while lower income households may be struggling. Indeed, the District of Columbia has the 8th highest poverty rate, and Massachusetts has the 4th highest cost of living.

At the other end, Mississippi has the lowest top 1% household income at $312,628, followed by West Virginia, New Mexico, Maine, and South Dakota, which all have incomes below $390,000. Amazingly, the top 1% household income in Mississippi is less than a third of the top 1% income in DC, with a gap of about $670,000.

Mississippi and West Virginia are in the bottom 3 for household income at all income levels, but as mentioned before, they also have some of the lowest costs of living. However, these are apparently not low enough because Mississippi has the highest poverty rate of any state, and West Virginia comes in 9th. Similarly, New Mexico is in the bottom 5 for household income from median to top 1% (and is also 7th lowest at the 25th percentile), and it has the 2nd highest poverty rate.

South Dakota and Maine are interesting here. They are in the middle of the pack for all other income levels (and South Dakota is actually 9th highest at the 25th percentile), but they are in the bottom 5 for the top 1% of income. This suggests that the majority of households in these states are doing fine, but the richest households have much lower incomes than in other states. Indeed, they have the 29th and 30th highest poverty rates, respectively, significantly better than Mississippi, West Virginia, and New Mexico. Why the top 1% household income is so low in these states is unclear, especially since South Dakota has no income tax. Perhaps there is simply a lack of job opportunities at these high income levels in these states.

Conclusion

Overall, it’s apparent that household income varies widely by state. There is also quite a bit of variation by income quartile. Some states have household incomes towards the top of the range across income levels, such as Maryland below top 1%, and some remain at the bottom of the range for all income levels, such as Mississippi and West Virginia. Others jump from middle of the pack at most income levels to the top at the 1% level, such as Delaware, or fall from the middle to the bottom at the 1% level, such as South Dakota and Maine. The reasons for this are likely unique to each state and may involve cost of living, taxes, and job opportunities.

Advertisement

2 thoughts on “How State Household Income Varies By Income Quartile

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s