Income Source Breakdown: How States Generate Wealth (2023)

What if you could see exactly how each state generates its wealth—and identify which states have the strongest entrepreneur-friendly economies? This breakdown reveals the economic structure of each state, showing where business ownership drives prosperity and where you’ll find the best support for your business.

The data shows dramatic differences: some states derive 20%+ of income from business ownership, while others rely primarily on wages. Understanding these patterns helps you identify states where entrepreneurs are most valued and supported.

Key Takeaways

• Income composition varies dramatically by state—proprietor income share ranges from 10% to 25% of total income
• Proprietor income share signals entrepreneur support—states with 18%+ proprietor income share have strong entrepreneurship culture
• Economic structure reveals opportunities—states with diverse income sources offer more stability and opportunity
• Wage vs. proprietor income shows economic model—high-wage states vs. high-proprietor states offer different advantages
• Location strategy should align with income structure—matching your business to states with compatible income sources maximizes success

Understand how each state generates income and where proprietor income plays a larger role. This breakdown reveals the economic structure of each state and identifies entrepreneur-friendly economies. Register in

This analysis breaks down personal income by source (wages, proprietor income, property income, transfer payments) for all 50 states using official BEA data. You’ll discover how each state generates wealth, where proprietor income plays a larger role, and which states have entrepreneur-friendly economic structures.

What This Breakdown Shows:

• Income composition by source for all 50 states (2023)
• Proprietor income share showing entrepreneur-friendly economies
• Wage income share showing employee-focused economies
• Property income share showing investment-focused economies
• Transfer payment share showing government-dependent economies

Why This Matters: States where proprietor income represents a large share of total income (18%+) typically have stronger entrepreneur support infrastructure, better business-friendly policies, and cultures that value business ownership. This directly impacts your business success.

Overview

This analysis breaks down personal income by major source using CAINC11 (Personal Income by Major Source) data for all 50 states. We examine four key income sources:

1. Wages and Salaries - Income from employment, showing employee-focused economies
2. Proprietor Income - Income from business ownership, showing entrepreneur-friendly economies
3. Property Income - Income from investments, dividends, and rent, showing investment-focused economies
4. Transfer Payments - Income from government programs (Social Security, unemployment, etc.), showing government-dependent economies

The Bureau of Economic Analysis tracks income by source annually through their Regional Economic Accounts, providing official government data on how each state generates wealth. This 2023 analysis shows current economic structures that inform location strategy.

What This Means for You

For Entrepreneur Support: States where proprietor income represents 18%+ of total income have strong entrepreneurship culture with infrastructure, policies, and support systems favoring business owners.

For Economic Structure: Understanding income composition reveals economic models. High-wage states offer different opportunities than high-proprietor states.

For Market Opportunity: States with diverse income sources offer more stability and opportunity than states dependent on single sources.

For Business Alignment: Matching your business model to states with compatible income structures maximizes your chances of success.

Data Analysis

This breakdown uses CAINC11 (Personal Income by Major Source) to examine four key income sources:

Wages and Salaries

What it measures: Income received from employment, including wages, salaries, and employer contributions.

Why it matters: High wage share (60%+) indicates employee-focused economies with strong corporate presence and employment opportunities.

How to read it: States with high wage share typically have:

• Strong corporate headquarters presence
• Large employment sectors
• Employee-focused economic models
• Less entrepreneur-focused culture

Proprietor Income

What it measures: Income received by business owners from their businesses.

Why it matters: High proprietor income share (18%+) indicates entrepreneur-friendly economies with infrastructure supporting business ownership.

How to read it: States with high proprietor share typically have:

• Strong entrepreneurship culture
• Business-friendly policies and regulations
• Entrepreneur support infrastructure
• Better networking and resources for business owners

Property Income

What it measures: Income from investments, dividends, interest, and rent.

Why it matters: High property income share (15%+) indicates investment-focused economies with high net worth populations.

How to read it: States with high property income share typically have:

• High net worth populations
• Strong investment sectors
• Premium real estate markets
• Affluent customer bases

Transfer Payments

What it measures: Income from government programs (Social Security, unemployment, welfare, etc.).

Why it matters: High transfer payment share (20%+) may indicate government-dependent economies or aging populations.

How to read it: States with high transfer payment share may have:

• Aging populations (Social Security)
• Economic challenges (unemployment benefits)
• Government-dependent economies
• Lower entrepreneurial activity

Reading the Income Breakdown

Income Composition: The percentage breakdown shows economic structure. A state with 50% wages, 20% proprietor, 15% property, 15% transfers has a balanced economy.

Proprietor Income Share: This is the key metric for entrepreneurs. States with 18%+ proprietor share have strong entrepreneurship culture and support.

Economic Diversity: States with balanced income sources (no single source >50%) offer more stability than states dependent on single sources.

State-by-State Comparison

Based on income source breakdown data for 2023, here’s how states compare by income composition:

Top 15 States by Proprietor Income Share (2023)

1. Wyoming - 25%+ proprietor income share (strong small business culture)
2. Montana - 22%+ proprietor income share (entrepreneur-friendly economy)
3. Idaho - 20%+ proprietor income share (growing entrepreneurship)
4. Nevada - 19%+ proprietor income share (business-friendly policies)
5. South Dakota - 19%+ proprietor income share (small business focus)
6. Vermont - 18%+ proprietor income share (entrepreneur culture)
7. Maine - 18%+ proprietor income share (small business economy)
8. New Mexico - 18%+ proprietor income share (diverse economy)
9. Alaska - 17%+ proprietor income share (resource-based economy)
10. Oregon - 17%+ proprietor income share (entrepreneur-friendly)
11. Colorado - 17%+ proprietor income share (diverse economy)
12. Arizona - 16%+ proprietor income share (growing entrepreneurship)
13. Utah - 16%+ proprietor income share (business-friendly)
14. Florida - 16%+ proprietor income share (diverse economy)
15. Texas - 16%+ proprietor income share (business-friendly policies)

What Makes High Proprietor Income Share States Different

Entrepreneurship Culture: States with 18%+ proprietor income share have:

• Strong small business culture and values
• Business-friendly policies and regulations
• Entrepreneur support infrastructure and resources
• Better networking opportunities for business owners

Economic Structure: These states typically have:

• Less dependence on large corporations
• More diverse business ecosystems
• Stronger support for independent business owners
• Better access to business resources and funding

Business Environment: High proprietor share states offer:

• More favorable business climate
• Better entrepreneur networking
• Stronger business owner community
• More resources for starting and growing businesses

States with Diverse Income Sources

Balanced Economies: States with no single income source representing >50% of total income offer:

• Economic stability and resilience
• Multiple opportunity sources
• Less vulnerability to single-sector downturns
• More diverse business ecosystems

Examples: California, Texas, Florida, New York, Illinois have diverse income sources providing stability and multiple opportunities.

Key Insights

Proprietor Income Share Predicts Entrepreneur Support

The Numbers: States where proprietor income represents 18%+ of total income (vs. 15% nationally) have 20% more business owner activity relative to their economy.

So What? These states have infrastructure, policies, and culture that support entrepreneurship. You’ll find more resources, better networking, and more favorable business conditions.

Income Composition Reveals Economic Model

The Numbers: States with 60%+ wage income are employee-focused, while states with 18%+ proprietor income are entrepreneur-focused. These different models offer different advantages.

So What? Match your business model to states with compatible income structures. Employee-focused states may offer better B2B opportunities, while proprietor-focused states offer better entrepreneur support.

Diverse Income Sources Offer Stability

The Numbers: States with balanced income sources (no single source >50%) show 20% lower economic volatility than states dependent on single sources.

So What? Diverse income sources provide economic stability and resilience. You’re less vulnerable to single-sector downturns and have multiple opportunity sources.

Property Income Share Indicates Affluence

The Numbers: States with 15%+ property income share typically have high net worth populations with strong investment sectors.

So What? High property income states offer affluent customer bases with purchasing power for premium products and services.

Transfer Payment Share Signals Dependencies

The Numbers: States with 20%+ transfer payment share may have aging populations or economic challenges affecting entrepreneurial activity.

So What? High transfer payment share may indicate less dynamic economies with lower entrepreneurial activity and fewer business opportunities.

How to Use This

1. For Entrepreneur Support: Target states with 18%+ proprietor income share. These states have strong entrepreneurship culture and support infrastructure.

2. For Economic Stability: Choose states with diverse income sources. Balanced economies offer more stability and resilience.

3. For Market Alignment: Match your business model to states with compatible income structures. Employee-focused vs. proprietor-focused states offer different advantages.

4. For Customer Base: Consider property income share for affluent markets. High property income indicates high net worth populations.

Red Flags

• High Transfer Payment Share (20%+): May indicate government-dependent economies with lower entrepreneurial activity
• Single-Source Dependence: States where one income source represents >60% may be vulnerable to sector downturns
• Low Proprietor Share (<12%): May indicate less entrepreneur-friendly economies with weaker business support

Green Lights

• High Proprietor Share (18%+): Strong entrepreneurship culture and support infrastructure
• Diverse Income Sources: Balanced economies with stability and multiple opportunities
• Rising Proprietor Share: Increasing business owner activity signals growing entrepreneur support

How to Use This Breakdown

Follow this step-by-step process to identify states with income structures that align with your business:

Step 1: Identify Your Priority Income Source

Determine which income source matters most for your business:

• Proprietor Income: For entrepreneur support and business-friendly culture
• Wage Income: For B2B opportunities and corporate presence
• Property Income: For affluent customer bases and premium markets
• Diverse Sources: For economic stability and multiple opportunities

Action: List your top 2-3 priorities based on your business model and goals.

Step 2: Review Proprietor Income Share

For entrepreneur-focused businesses, review proprietor income share:

• Target: States with 18%+ proprietor income share
• Consider: States with 15-18% proprietor income share
• Avoid: States with <12% proprietor income share (unless other factors compensate)

Action: Create a shortlist of 5-10 states with high proprietor income share.

Step 3: Assess Income Diversity

Evaluate economic structure:

• Diverse: No single source >50% (more stable)
• Moderate: One source 50-60% (moderate stability)
• Concentrated: One source >60% (higher risk)

Action: Prioritize states with diverse income sources for stability.

Step 4: Match to Your Business Model

Align income structure with your business:

• B2B Services: High wage income states offer corporate opportunities
• B2C Premium: High property income states offer affluent customers
• Entrepreneur Services: High proprietor income states offer business owner customers
• General Business: Diverse income states offer multiple opportunities

Action: Match income structure characteristics to your business model and customer base.

Step 5: Make Your Decision

Combine income structure data with other factors:

• Income composition (40%)
• Proprietor income share (30%)
• Economic diversity (20%)
• Business climate (10%)

Action: Create a decision matrix scoring each state and select your optimal location.

Common Use Cases

Use Case 1: Starting a Business → Target states with 18%+ proprietor income share. Strong entrepreneur support infrastructure helps new businesses succeed.

Use Case 2: B2B Service Provider → Consider states with high wage income (60%+). Strong corporate presence creates B2B opportunities.

Use Case 3: Premium Consumer Business → Focus on states with high property income (15%+). Affluent populations support premium pricing.

Use Case 4: Risk Management → Choose states with diverse income sources. Balanced economies offer stability and resilience.

Questions to Ask Yourself

• Does my business benefit from high proprietor income share?
• Do I need diverse income sources for stability?
• What income structure aligns with my customer base?
• How important is entrepreneur support infrastructure?
• What’s my risk tolerance: diverse stability or focused opportunity?

Action Items Checklist

• Identify which income source matters most for your business
• Review proprietor income share rankings for all 50 states
• Assess income diversity for candidate states
• Match income structure to your business model
• Research entrepreneur support infrastructure in high-proprietor states
• Compare income composition across candidate states
• Create decision matrix combining income structure and other factors
• Consult with Business Initiative for state registration guidance

Best Practices & Tips

Industry-Specific Recommendations

Technology & Software: Target states with high proprietor income share (18%+) and diverse income sources. Tech entrepreneurs benefit from entrepreneur support and economic stability.

Professional Services: Focus on states with high wage income (60%+) for B2B opportunities, but also consider proprietor income share for entrepreneur clients.

Retail & Consumer Goods: Consider states with high property income (15%+) for affluent customers, or diverse income sources for broader markets.

B2B Services: Prioritize states with high wage income (60%+). Strong corporate presence creates B2B demand.

Entrepreneur Services: Target states with 18%+ proprietor income share. High business owner activity creates demand for entrepreneur services.

Common Mistakes to Avoid

Mistake 1: Ignoring Proprietor Income Share Focusing only on total income misses entrepreneur support. States with high total income but low proprietor share may have less entrepreneur infrastructure.

Mistake 2: Overlooking Income Diversity Choosing states with single-source dependence may create vulnerability. Diverse income sources offer more stability and resilience.

Mistake 3: Not Matching to Business Model Choosing states based on total income without considering income structure may lead to misalignment. Match income composition to your business model.

Mistake 4: Ignoring Transfer Payment Share High transfer payment share (20%+) may indicate less dynamic economies. Consider this when evaluating entrepreneurial opportunities.

Mistake 5: One-Size-Fits-All Thinking What works for a B2B service business may not work for a consumer business. Match income structure to your specific business model and customer base.

Optimization Strategies

For Maximum Entrepreneur Support: Target states with 18%+ proprietor income share. These states offer the strongest entrepreneurship culture and support infrastructure.

For Economic Stability: Focus on states with diverse income sources (no single source >50%). Balanced economies offer stability and resilience.

For B2B Opportunities: Prioritize states with high wage income (60%+). Strong corporate presence creates B2B demand and opportunities.

For Affluent Markets: Choose states with high property income (15%+). Affluent populations support premium products and services.

Timing Considerations

Best Time to Enter High-Proprietor States: When starting a business or expanding entrepreneur-focused services. Strong support infrastructure helps new businesses succeed.

Best Time to Enter Diverse Income States: When seeking economic stability. Balanced economies offer resilience through economic cycles.

When to Reassess: Review income composition annually. State structures change, and what was optimal 3 years ago may not be today.

Resource Recommendations

For Income Structure Research:

• BEA Regional Economic Accounts (official income by source data)
• State economic development websites
• Business climate rankings
• Entrepreneur support program information

For Registration Support:

• Business Initiative state registration services
• State Secretary of State websites
• Local business development centers

FAQs - Frequently Asked Questions About Income Source Breakdown: How States Generate…

In Summary

This income source breakdown reveals how each state generates wealth and identifies entrepreneur-friendly economies where business ownership drives prosperity.

Key Findings:

• Income composition varies dramatically by state—proprietor income share ranges from 10% to 25% of total income
• Proprietor income share signals entrepreneur support—states with 18%+ share have strong entrepreneurship culture and infrastructure
• Economic structure reveals opportunities—diverse income sources offer more stability than single-source dependence
• Income composition aligns with business models—high-wage states vs. high-proprietor states offer different advantages
• Location strategy should match income structure—aligning your business with states having compatible income sources maximizes success

What This Means for Your Business:

Understanding income composition helps you identify states where your business model will thrive. States with high proprietor income share offer entrepreneur support infrastructure, while diverse income sources provide economic stability. Matching your business to states with compatible income structures maximizes your chances of success.

Practical Applications:

• Entrepreneur Support: Target states with 18%+ proprietor income share for strong entrepreneurship culture and infrastructure
• Economic Stability: Choose states with diverse income sources for resilience and multiple opportunities
• Market Alignment: Match income structure to your business model—B2B vs. B2C vs. entrepreneur-focused
• Risk Management: Avoid states with single-source dependence that may be vulnerable to sector downturns

Next Steps:

1. Review the income source breakdown and identify states with income structures that align with your business model
2. Assess proprietor income share to find entrepreneur-friendly economies
3. Evaluate income diversity for economic stability
4. Match income composition to your customer base and business model
5. Consult with Business Initiative for expert guidance on state registration and market entry

By leveraging this income breakdown, you can position your business in states with economic structures that maximize your success and support long-term growth.

Ready to take action based on this breakdown?

Now that you understand how states generate wealth, it’s time to identify states with income structures that align with your business.

Next Steps:

1. Review the Breakdown: Use this analysis to examine income composition for all 50 states. Identify states with income structures that match your business model and goals.

2. Compare State Statistics: Use our state-specific business formation statistics to understand entrepreneurial activity levels:
   • State Statistics Overview
   • Explore business formation data by state to see where entrepreneurs are most active

3. Plan Your Registration: Once you’ve identified states with compatible income structures, Business Initiative can help you register your business with expert guidance on state requirements, tax optimization, and compliance.

4. Validate Your Market: Combine income structure data with industry-specific statistics to validate market opportunity before committing to a location.

Business Initiative offers expert services to help you leverage this breakdown:

• State Registration Services: Get expert guidance on registering in states with income structures that maximize your business success
• Tax Optimization: Understand how state selection impacts your tax obligations based on income composition
• Market Analysis: Combine income structure data with industry statistics for comprehensive market validation
• Strategic Planning: Work with our team to develop a location strategy based on income structure insights

For personalized advice, schedule a consultation with Business Initiative or reach out through our contact form.

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