Two other ways of measuring state incomes are after taxes (disposable personal income in the BEA data) and adjusted for local living costs (real personal income). Despite having the second-highest state and local tax burden, according to the Tax Foundation, behind only New York, Connecticut was tops among the states in disposable personal income from 1987 through 2019 and was No. 2 to Massachusetts in 2022, just as in the pretax numbers. The real personal income data only go back to 2008, and they show Connecticut on top for most years through 2019 (it lost out to North Dakota in 2013 and 2014) and currently third behind Wyoming and North Dakota—but ahead of Massachusetts.
What all these measures have in common is that they show Connecticut incomes losing ground relative to other states in recent years. This isn’t exactly news within the state, where the 2010s are often referred to as the “lost decade.” (It also isn’t exactly news that Connecticut has fallen out of the top per capita income spot; columnist Dan Haar of Hearst Connecticut Media Group reported it in December 2022.)
Blame for the state’s long malaise has been assigned both to high taxes and high inequality. The state is also heavily dependent on a financial sector that has been struggling, with finance and real estate accounting for 26.7% of its gross domestic product in 2022, a share that trails only Delaware’s and New York’s but is down from 29.9% in 2017 (earlier numbers aren’t currently available). Massachusetts, by comparison, has a more diversified economy and lower taxes, with the 13th-highest state and local tax burden, but similar income inequality, coming in just behind Connecticut in the Gini rankings.
Another factor working against Connecticut in the 2010s was that it doesn’t have a big city, and big cities were hot in the 2010s. They seem to be less hot in the 2020s, and Connecticut has apparently benefited from the move to hybrid work, with its population growing in 2021, 2022 and 2023, according to Census Bureau estimates, even as that of next-door neighbor New York shrank. The state’s economy has also been growing at roughly the same pace as the nation’s since early 2021, which is a big shift from what happened in the 2010s. Connecticut does not seem to be in a downward spiral, and all indications are that it will continue to be a high-income state.
What it probably won’t be anytime soon, though, is a state with a per capita personal income more than 50% above the national level, as it was in 2009 and 2010. Given that Connecticut reached those heights during and immediately after the worst U.S. recession in three quarters of a century, that seems like a good thing. The modest signs of income convergence among U.S. regions since then, and especially since 2020, seem like good news, too. Connecticut will be fine. The rest of the country might be better off.
Justin Fox is a Bloomberg Opinion columnist covering business, economics and other topics involving charts. A former editorial director of the Harvard Business Review, he is author of The Myth of the Rational Market.