High-income earners, it turns out, are fleeing the state, too, a new twist on California’s departure.
That should worry the ruling Lib Dems who love to tax rich people and spend their money, especially on social programs.
Some golden geese are taking flight.
For years, once-booming California has hemorrhaged population. This has been happening on several fronts.
More people leave for other states than move here.
The inflow of foreign immigrants has slowed down substantially.
Fewer babies are being born. More people are dying.
It is the flow of Californians to other states that is so unusual. throughout the 20he century, people from the Midwest and South, from all over the United States, flocked here in search of work, opportunity, sun and a better life.
My dad left his family’s depressed Tennessee farm in the 1920s to work in the oil fields of Southern California. My mother, who was a quarter Cherokee, left Oklahoma at the same time because she thought her home state was bigoted and California was more tolerant and enlightened. Neither of them ever regretted it.
Millions of Californians have similar stories.
But many descendants of last century’s newcomers now see better opportunities for the good life in other states. California is too expensive and your earnings can buy more elsewhere.
That being said, our big cities are still crowded. And we have more people than our available water and electricity networks can often handle, contributing to departures.
California remains by far the most populous state, with an estimated 39 million people last year, according to the US Census Bureau. But Texas was ahead with 30 million.
entering the 21street century, when California’s population was about 34 million, it was predicted that we would reach 45 million by 2020 and 59 million by 2040. That’s it. We reached a peak of 39.6 million in 2019 and have been losing population ever since.
Until now, we’ve been in denial, telling ourselves that high-income, college-educated people wouldn’t go away. Our progressive tax base and growing economy were secure. Those who left were low-to-middle-income people who didn’t pay big taxes or create big jobs.
They all seemed to accept that, though many could cite anecdotal evidence to the contrary.
I plead guilty. This is what I wrote two years ago:
“More wealthy people have moved here than have left. They can afford our rising costs of living. The political spin on the abandonment of California by the rich is fake news.”
That was what the think tanks said. Now one dug into the latest data and found that people from all economic classes are leaving, including the wealthy.
“Most surprisingly, California is now losing higher-income households, as well as lower- and middle-income households.” the independent Public Policy Institute of California reported Tuesday.
Outward migration “has the power to reshape the state,” the PPIC asserted, adding that “the state is no longer a significant draw to out-of-states of any age, education, or income.”
“California still has an incredible economy, a world powerhouse,” says PPIC demographer Eric McGhee. “There are a lot of positives here, but a shrinking population is a sign that something is wrong for people. They feel like they can’t make a good life here.”
That’s partly because, for many people, housing isn’t affordable or worth it compared to cheaper housing in other states.
The median price of a single-family home in California was $735,480 last month, according to the California Association. of Real Estate Agents. That is out of reach for many people even though it was almost 5% lower than the previous February. Since then, mortgage interest rates have risen dramatically.
We all know one of the reasons for high housing costs: demand exceeds supply. We’re building only a third of the houses we were building 60 years ago, when the population was less than half what it is today, said Dan Dunmoyer, president of the California Building Industry Association.
Another reason for high costs and slow construction is a regulatory quagmire, including lawsuits, some frivolous, aimed at blocking housing developments.
Dunmoyer says that two regions of Texas, Houston and the Dallas-Fort Worth area, built more homes last year than all of California. In 2022, approximately 128,000 home building permits were issued in California, about half the number in 2005.
The net loss of high-income earners is relatively small, McGhee says. But the number leaving California “increased dramatically” to 220,000 in 2021, she reports.
It wouldn’t take a lot of rich people fleeing to damage the state treasury. The top 1% of earners pay nearly 50% of state income taxes. The top 10% contribute about 80%.
“Taxes are definitely part of the story” why high-income people are leaving, says McGhee. “Taxes are the last straw that pushes them to the brink.”
California imposes by far the highest state income tax rate in the country: 13.3%. Texas is the preferred destination for those leaving California, according to the Census Bureau. The Lone Star State has no income taxes. Nor Nevada, another of the favorites. Or Washington and Florida, other attractive states for Californians. The number 2 destination is Arizona.
Many high-income, college-educated people are moving out of state because they can now work from home anywhere in the country for a California company that pays well, McGhee says.
We’ll see how long that lasts once California businesses realize that the costs of living for their employees have come down and they no longer need to pay as much. The workers will most likely not return to California yet.