10 States With the Most Income Inequality

America’s real median gross annual income per household was $61,372 in 2017, a 1.8 percent increase from the previous year. It has been steadily decreasing since 2014, when the median income was $54,398. While this slow increase seems promising, economic inequality remains an important issue in the U.S., especially as the richest Americans get richer and everyone else gets poorer or stays the same.

According to the Economic Policy Institute (EPI), unequal income distribution has been a rising issue in every U.S. state since the 1970s. In 43 states, the issue has worsened since the Great Recession. In 2016, the wealthiest 1 percent of the American population held about 40 percent of the nation’s wealth.

While the United States Census Bureau does not measure individual net worth, it last measured the average net worth of American households in 2011. During the time of this study, the average net worth in America was $68,828 per household. The next calculation will occur in 2021.

Check out the 10 states with the most income inequality below.

1. New York

Recent income inequality statistics from Zippia and the Economic Policy Institute (EPI) suggests that New York had the greatest income gap if any state. According to the EPI, the top 1 percent of Americans earned an average annual income of more than $2.2 million in 2015, while the bottom 99 percent earned an average of $49,617 per household.

While Manhattan is one of the wealthiest cities in the U.S., income inequality and poverty persists. Today, approximately 21 percent of the city’s residents live in poverty.

Largest industry: Elementary and secondary schools

Highest-paying industry: Securities and other financial investments

2. Connecticut

According to Zippia, Connecticut had the second-largest income disparity of any state between 2012 and 2016. The average income of the top 1 percent of Americans exceeded $2.5 million in 2015, while the bottom 99 percent earned a little more than $67,700 per year.

Largest industry: Elementary and secondary schools

Highest-paying industry: Securities and other financial investments

3. Louisiana

Louisiana is among the top three states with the most income inequality in the U.S., according to Zippia. The average income of the top 1 percent of Americans exceeded $814,300 during the 2015 year, while the bottom 99 percent earned an average income of around $45,000. Some experts believe that education and income inequality go hand-in-hand, and recent statistics show that Louisiana is one of the least educated states in the U.S.

Largest industry: Construction

Highest-paying industry: Metals and minerals

4. California

As one of the biggest states in the U.S., California also has one of the greatest income disparities in the nation. According to the EPI, the top 1 percent of Americans earned an average income of more than $1.6 million in 2015, while the bottom 99 percent earned just over $55,000.

Largest industry: Restaurants and food services

Highest-paying industry: Video tape and disk rental

5. Florida

In Florida, the average income of the top 1 percent of residents exceeded $1.5 million in 2015. Moreover, the bottom 99 percent of Floridians earned an average income of just over $39,000 per year.

Due to the state’s high top-to-bottom ratio of 39.5, some experts believe that Florida’s income disparity make it among the top three worst states for income inequality.

Largest industry: Restaurants and food services

Highest-paying industry: Paper and pulp products

6. Massachusetts

With a top-to-bottom ratio of 30.9, the average income of the top 1 percent of Americans exceeded $1.9 million in 2015. Moreover, the state’s income distribution is extremely uneven, as the bottom 99 percent earned an average of $61,690 per year.

Largest industry: Hospitals

Highest-paying industry: Agriculture and forestry

7. Georgia

While Georgia’s top-to-bottom ratio of 22.6 falls below the national average of 26.3, disparities in gross annual income remain an issue in the state. In 2015, the top 1 percent of Americans earned around $995,500 per year, while the bottom 99 percent took home an average amount of just over $44,000. This makes Georgia seventh in income inequality.

In fact, according to a Bloomberg report, the city of Atlanta has the highest income inequality in the entire United States.

Largest industry: Restaurants and food services

Highest-paying industry: Information services and broadcasting

8. Texas

The top 1 percent of Texans earned an average income of more than $1.3 million in 2015. Moreover, the bottom 99 percent of residents earned an average income of just over $55,600. This gives the state a top-to-bottom ratio of 24.2, just below the national average. Inequality in the state remains high even as poverty rates continue to drop.

Largest industry: Construction

Highest-paying industry: Software publishing

9. Mississippi

Not all experts agree that Mississippi belongs among the list of states with the largest income gaps. According to the EPI’s income inequality statistics from 2015, however, the average income of the bottom 99 percent of state residents was just over $35,300.

During the same year, the top 1 percent of Americans took home more than $580,460. As with Louisiana, these adjusted gross income gaps could be due partly to the fact that Mississippi is one of the least educated states in the nation.

Largest industry: Restaurants and food services

Highest-paying industry: Oil and gas extraction

10. Illinois

Last on the list of states with the most net income inequality is Illinois. With a top-to-bottom ratio of 27.0, the average income of the top 1 percent of residents exceeded $1.4 million in 2015. Moreover, the bottom 99 percent took home an average amount of just over $52,200.

Largest industry: Restaurants and food services

Highest-paying industry: Securities, commodities, funds and trusts

Simple Tips for Wealth Creation

While the pay gap remains an issue in the U.S., several passive income investments can help individuals to increase their earnings over time — regardless of age, gender, race, education level and skill. Examples of investment income may include earnings from rental properties, dividend stocks, peer-to-peer lending and index funds.

According to Forbes, something as simple as investing in dividend-paying stocks can help individuals to generate more than $1,000 per month in passive income, depending on the original investment amount. Additionally, these investors don’t need a college education or professional experience to get started.

Keep in mind that most investors need to pay taxes on their capital gains, and some need to pay upfront costs. In 2018, for instance, the short-term capital gains tax rate ranged from 10  to 37 percent. For long-term profits, most taxpayers needed to pay a tax rate of zero, 15 or 20 percent. Consulting with a financial advisor can help you make the best decisions for your financial future.

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