Copeland: Is Delaware attracting families or just retirees?
Charlie Copeland is the director of the Center for Analysis of Delaware’s Economy & Government Spending at the Caesar Rodney Institute.
Last year, the Caesar Rodney Institute published a migration analysis showing Delaware’s inbound and outbound migration trends over a decade. Focusing on inbound migration, our May 2022 analysis implied that only retirees were moving to Delaware. But let’s test this insight and look at other “key factors” that might make a family want to move to Delaware (i.e., wealth accumulation, wealth preservation and educated children).
Delaware’s inbound migration data has been updated with the most recent data through 2021. Delaware is gaining most of its new residents (91.1%) from only four states: Pennsylvania, New Jersey, New York and Maryland.
Three states (Pennsylvania, New Jersey and Maryland) are in our immediate economic area. Let’s look at how Delaware compares to these neighbor states in terms of state gross domestic product growth, per capita income levels (and mix of income), local tax environment and schools.
Delaware’s GDP growth
Twenty-five years ago, Delaware had the strongest relative gross domestic product in the mid-Atlantic, but the state’s economy never recovered from the 2001 recession. Fortunately for Delaware, however, our neighbors are not much better. Maryland tracked ahead of its regional peers primarily because of historic federal spending. Still, Delaware, New Jersey and Pennsylvania have all been anemic performers, though Pennsylvania looks to supplant Delaware in the No. 2 regional position.
Given the GDP trends over the last 25 years, it is doubtful that people from the mid-Atlantic have moved to Delaware because of its strong economy, which Delaware does not have. However, its neighboring states’ economic weaknesses do not penalize Delaware for its poor economy.
Delaware’s per capita income levels
During the last 25 years, Delaware per capita income has gone from second worst to worst regionally. While the downtrend is bad, further analysis exposes a very serious problem for Delaware.
Personal net income can be divided into three categories:
- Net earnings (a paycheck).
- Dividends/interest/rent (investment income).
- Government assistance.
In 1997, 66.7% of Delaware’s personal net income came from a paycheck. Today, that number has declined to 59.5%. While earnings from a paycheck have declined, government assistance has nearly doubled. In 2022, almost 25% of personal net income came from government assistance (a change dwarfing any of our regional competitors’). This trend is very concerning!
Delaware’s personal net income has trended behind other mid-Atlantic states for 25 years, and the share of that income from government assistance has almost doubled (a staggering amount). Therefore, people are unlikely to have moved to Delaware because of their paychecks.
Delaware’s local tax environment
Given the previous data on Delaware’s gross domestic product and personal net income, how does Delaware rank in its citizens’ ability to keep their money?
According to the Tax Foundation’s 2024 State Business Climate Index, Delaware’s corporate and individual tax rates are among the highest in the nation but are competitive with adjacent states. While Delaware brags that it does not have a “sales tax,” it has a “gross receipts tax,” which harms small-business development.
Delaware’s tax rates are no better than our regional competitors and probably did not encourage job seekers or entrepreneurs to move to Delaware as part of inbound migration.
Delaware schools
Delaware, like every state, participates in the National Assessment of Education Progress (often called the “Nation’s Report Card”). Comparing fourth and eighth graders in Delaware to its neighboring states shows that Delaware students perform poorly compared to our mid-Atlantic peers. In fact, Delaware is dead last.
Delaware’s failing public school system, as graded by the federal government, means that it is unlikely that families moved to Delaware to educate their children.
Conclusion
In our pursuit to understand migration motives to Delaware, Caesar Rodney Institute’s analysis aligns with our May 2022 findings, underscoring that Delaware’s inbound migration is predominantly retirees who are looking to stay near their families, while taking advantage of low relative real estate taxes.
In short, Delaware’s inbound migration is dominated by retirees. The economic and tax implications of this trend are enormous.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
