Many Americans aspire to join the ranks of the wealthy, but the income threshold that qualifies someone as wealthy varies widely depending on where you live.
A new study from GoBankingRates.com found that it takes significantly more income to be in the top 5% of earners than it did just a few years ago, looking at five years of state income data from 2017 to 2022, the most recent year for household income data from the U.S. Census Bureau.
The easiest place to reach the top is West Virginia, where an annual income of $329,620 would count you among the top earners, but in Washington, D.C., you'd need to make more than double that, $719,253, to be in the top 5%.
Andrew Murray, chief data content researcher at GoBankingRates, said Americans' fortunes have improved over the past few years, in part because the federal government has doled out billions of dollars in aid to businesses and taxpayers in response to the pandemic. At the same time, census data shows that the share of income going to the nation's highest-income households has increased, fueling widening income inequality.
“COVID relief has bolstered the economy, leading to higher stock prices, higher real estate prices and higher savings,” Murray told CBS MoneyWatch. “This has been particularly beneficial for wealthy Americans, whose incomes have increased dramatically, given that many companies are making record profits.”
Certainly, income is not the same as wealth. Growth since the pandemicBut earning a higher salary can help families build assets, allowing them to buy a home, invest in their children's education, and take other steps to solidify their wealth.
Murray said the big jump in income for the nation's highest-income households before and after the pandemic may be one of the most important stories for the U.S. economy.
“Even though the bottom 20% of earners have seen their salaries increase substantially, their overall share of wealth in the country has actually decreased as the rich get even richer,” he said.
According to GoBankingRates, Mississippi had the second-lowest minimum income threshold to be included in the top-income bracket, behind West Virginia, at $333,597.
Meanwhile, the study found that in many eastern states, you need to earn a pretty steep amount to be in the top 5 percent of earners, ranging from $656,438 in Connecticut to $621,301 in New York.
“This is a cost of living issue,” Murray said. “People in New York and Washington, D.C., make more than people in lower-cost-of-living states like Arkansas and Louisiana.”
According to GoBankingRates, Idaho, Nevada and Washington saw the biggest increases in the amount of money needed to enter their state's top income bracket between 2017 and 2022. Idahoans would need to earn $115,769 more per year, while Nevadans would need to earn an additional $129,469. Washingtonians would need to earn an additional $166,144 to be in the top 5%.
Murray said that's because of changes in the economies of Idaho, Nevada and Washington in recent years. Washington state, for example, saw resident incomes increase 44% between 2017 and 2022, “probably due to Seattle's growing reputation as a tech hub post-COVID-19,” Murray said.
In Idaho, Thousands of people moved to Boise. He said that during the pandemic, they carried with them the paychecks they earned from remote work jobs.
“In the case of Nevada, which ranked second overall in the study, gambling became more legal and accessible between 2017 and 2022,” Murray said. “This has resulted in significant increases in profits for companies headquartered in Las Vegas.”
