Connecticut has for many years been labeled the richest state in the nation because of its highest-in-the-nation per capita income, but that may be rapidly changing according to figures from the U.S. Bureau of Economic Analysis.
Massachusetts’ per capita income is now only $50 less than Connecticut, making Massachusetts the second richest state in the country, and the Bay State is closing the difference quickly. In 2017, Massachusetts’ per capita personal income was $4,231 less than Connecticut, according to the BEA.
Over the years of 2019 and 2020, Connecticut’s per capita income increased by 3 percent, the second slowest rate in the country, while Massachusetts increased 7.5 percent, the seventh fastest rate in the country
This left Connecticut’s per capita income at $79,771 and Massachusetts at $79.721, according to the BEA.
The average personal income growth in the country was 3.9 percent in 2019, but income growth surged 6.1 percent in 2020 as pandemic-related relief funds bolstered earnings and, according to the BEA, “was the leading contributor of income growth in all states.”
In Connecticut, net income and income from dividends, interest and rent declined by 1.8 and 1.4 percent respectively, while income from “transfer receipts” surged 33.7 percent, giving Connecticut the overall 3.1 percent rise in personal income.
Massachusetts, on the other hand, saw drops in net income and dividend, interest and rent income of 1.4 and 1.1 percent, while transfer receipts grew 61.5 percent.
The effects of the COVID-related transfer receipts can be seen in the second quarter of 2020, when Connecticut personal income growth surged 17.3 percent but then began to decline as federal stimulus money and increased unemployment benefits began to drop off.
During the last two quarters of 2020, personal income growth in Connecticut – and much of the rest of the nation – turns negative, although Connecticut weathered the downturn much better than its New England neighbors, including Massachusetts.
Connecticut’s income growth, however, has been trailing the rest of the country for the past ten years, however, and its title of richest state in the nation in term of per capita income may soon be eclipsed by its neighbor to the north, which has seen rapid income and job growth since the 2008 recession.
The idea of Connecticut’s richest state status is often used to justify tax increases and various programs put forward by lawmakers and policy advocates, who argue a program’s price tag shouldn’t matter for the richest state in the country.
But with the governor’s economic report forecasting a stagnant Connecticut economy in the upcoming years and other states rapidly moving up the personal income ladder even without COIVD relief funds, Connecticut’s status as richest state in the country may not last much longer.