You've Only Got Yourself To Blame
The questions of who are the 1% and what level of income demarcates the fat cats from the rest of Americans are likely to become more and more polarizing in the coming weeks. What is perhaps the most intriguing is the apparent dichotomy between the demographics (youth - who face considerably worse employment trends) and state-wealth who voted for Obama. As ConvergEx's Nick Colas notes, of all the U.S. states with an above-average incidence of their citizens earning over $200,000 (14 in total), all but one (Alaska) went for President Obama in last week’s election. At the other end of the income spectrum, only 2 states in the bottom 10 for +$200K earners (Maine and Iowa) had a majority of voters who sided with the President.
Via Nick Colas, ConvergEx:
In the spirit of the notion that politics makes strange bedfellows – we’ll interpret that to include roommates as well – I went looking for some examples from the recent Presidential election. And since there is so much fuss about the question of “What level of income makes a household well-off?” we threw that into the mix as well. In the tabel above you will find an analysis of state-by-state income levels, wealth disparity, cost of housing, and which candidate that state favored in last week’s election.
A few summary points:
- The greater the percentage of households making over $200,000/year in a given state, the more likely it is that its citizens voted for President Obama rather than Governor Romney. Of the top 10 states in terms of “high income” households as a percentage of the total state-wide population, nine of them will be awarding their Electoral College votes to Obama. The only holdout here is Alaska.
- There are a total of 13 states (plus DC) where the number of +$200,000/year households as a percentage of the state-wide exceed the national average of 3.93%. They are: the District of Columbia, Connecticut, New Jersey, Maryland, Massachusetts, New York, Virginia, California, Alaska, Hawaii, Illinois, Colorado, New Hampshire, and Rhode Island. As mentioned, Alaska went for Governor Romney. And it is the only state on this list that did.
- At the other end of the spectrum, the 10 states with the lowest percentage of +$200,000/year income households relative to the local population are Mississippi, Montana, West Virginia, Arkansas, Idaho, Kentucky, Indiana, Maine, Alabama, and Iowa. Eight of those states swung Republican in last week’s Presidential contest. The two exceptions were Iowa and Maine.
- The central irony of this straightforward math is that any increase in income taxes on the “Wealthy” will be disproportionately borne by the states which secured the President’s reelection. Only 1.87% of the households in the states mentioned in the last bullet – the Republican leaning ones – earn over $200,000. Conversely, an average of 6.48% of the households at the top end of the state-by-state list earns this much. And, as mentioned, with the exception of Alaska they all favored President Obama over Governor Romney.
- Whether this is merely correlation or causation is the subject of countless articles in political science journals, for as you review these lists of states you’ll see that this isn’t just about Election Day 2012. The hard-core “Red” states tend to have lower percentages of wealthy households, and the dyed-in-the-wool “Blue” states have more. Much more.
- Also, if you look at the GINI Index – a measure of income inequality – Republican leaning states enjoy more equality on these terms than the citizens of traditionally Democratic areas of the country. They may not be Sweden (GINI Index 23.0), but Romney-voting Mississippi, Montana, West Virginia, Arkansas and Idaho average 44.9 on the GINI scale. On the other side of the political and economic coin, Democratic strongholds New York, Massachusetts, Maryland, New Jersey, Connecticut and DC have an average GINI score of 48.0. That is a three-point difference – about the same as currently exists between the U.S. average (GINI score 47) and Iran (GINI score 45).
- You might argue that a dollar goes a lot further in some states than others, and you’d have a point. For example, the average median listing price for a single family home in the five states with the lowest percentage of +$200,000 households is $169,780 as of 2011. For the top five states (plus DC) in terms of high-income households, that number is almost twice as much at $304,140. “Wealthy” in Mississippi is different than “wealthy” in New York. Not that any attempt to implement a higher tax rate on the much-referenced “1%” will take that into account...