Last Tuesday, the California’s Legislative Analyst Office reported on the 2020 Migration data released by the IRS. The findings have been sending chills through the political class.
While in the past, outmigration tended to be more pronounced among lower-income Californians, in recent years the state has seen an increase in net outflows across all income brackets. Historically, upticks in outmigration have been associated with periods of rapid increases in cost of living.
Recently, the IRS released new data on taxpayer migration during the first year of the pandemic (2020). These data show that the state had a net outflow of about 260,000 taxpayers (0.8% of all taxpayers) in 2020, up from about 165,000 (0.5%) in 2019. The forgone state income tax collections associated with this net outmigration likely represent a bit over one percent of total state income tax revenues. This is about double the amount of forgone revenues associated with outmigration in 2019.
District 6 Assemblyman and Congressional candidate Kevin Kiley (R-Rockin) mentioned this in his blog, noting the numbers on internal migration in the state from lockdown counties like Los Angeles to the more free and independent counties that rejected Governor Gavin Newsom’s emergency declarations and COVID theater and instead chose to sign on to the Health Communities Resolution introduced by Kiley and fellow Assemblyman James Gallagher (R-Yuba City). This Resolution calls for local control of matters that concern the livelihood and health of its citizens; that elected officials will work with its people to customize its policies based on science and evidence, not enact a one-size-fits-all approach that has no foundation in real data and elicits more harm than good. Of the 14 or so counties that adopted this Resolution during the pandemic, most are to the North. San Luis Obispo and Orange County were the outliers.
New IRS data shows we just lost 260,000 taxpayers to other states, forfeiting twice as much revenue as any prior year. Clearly, this is not sustainable.
But the same report also revealed migration patterns within California. Just as people are leaving the Lockdown State of California for the Freedom States of Florida, Texas, and Idaho, they are also leaving California’s Lockdown Counties for its Freedom Counties.
Consider the Healthy Communities Counties. These are the counties that passed the Healthy Communities Resolution I wrote with James Gallagher in 2020. The Resolution was a statement of opposition to mandates and an assertion of local control.
Placer and El Dorado passed it first, followed by several North State counties, and eventually, 14 counties throughout California as far south as Orange. (See the Resolution and list of counties here)
According to the IRS data, almost every Healthy Communities County gained population, while hyper-lockdown counties like LA, SF, and Santa Clara hemorrhaged residents. This is truly a bellwether of change.
So soon, all that will be left in Los Angeles County, Santa Clara County, and Sacramento County are the drug-addicted and the mentally ill–housed and unhoused–illegals, and the political class.
Cal Matters also expressed concern that California is losing a substantial number of high-income taxpayers.
After 170 years of population growth — occasionally explosive growth — California is now experiencing population loss for the first time.
As foreign immigration and birth rates declined, they no longer offset net losses in state-to-state migration. Since 2010, 7.5 million people have left California while 5.9 million people have come from other states.
That gives rise to a question: Who is leaving California and why?
“Most people who move across state lines do so for housing, job, or family reasons,” Hans Johnson, a demographer for the Public Policy Institute of California, wrote earlier this year. Johnson also notes that those who leave California tend to be poorer and less educated than those who migrate to the state, which is not surprising given that housing and jobs dominate motivations.
There is, however, a less obvious subset of those who leave California — high-income families seeking relief from the state’s notoriously high taxes.
Back in 2020, The California Legislature attempted to pass Assembly Bill 2088, which wanted to impose a wealth tax based on the number of days a person lived in California. Charged annually, the tax would have been based on the current net worth of the individual, and include wealth earned, inherited, or obtained through gifts or estates long before, and after leaving the state.
It failed to pass (big surprise), but the greedy political class is not going quietly. After all, the Unions cannot fund everything.
Proposition 30 is the latest money grab, now on the November 2022 ballot, that would boost the top marginal tax rate to over 15 percent to raise money for programs to battle… climate change? Newsom’s intrusive hand at work once again.
There is also another tax hike push the California Legislature has planned for 2024. The only thing that will make them stop is when they have no taxable citizens to pay their hefty salaries.
It is apparent that the well-heeled got the memo, as they have spent the last two years finding less rapacious states in which to domicile.
Those of us actual taxpayers left continue to bear the freight.
The San Francisco Chronicle shed some light on that phenomenon when one of its reporters dove into Internal Revenue Service data that revealed favorite destinations of high-income former San Franciscans.
The newspaper found that 39,000 San Franciscans who had filed federal tax returns for 2018 had moved out of the city before filing 2019 returns. Collectively, they took $10.6 billion in income with them while people who moved to the city during that period reported just $3.8 billion in income.
Where are the higher-income elites now hanging their hat? States that have little to no income tax, and zero business taxes.
“The county that saw the wealthiest movers from San Francisco on average was Teton County, Wyoming, home to Jackson Hole and its famed ski resorts,” the Chronicle reported. “The data showed that 40 different families, comprising 63 people total, filed their 2019 taxes in San Francisco and then filed their 2020 taxes in Teton County, accounting for a total of $37 million in income moving from San Francisco to Teton. That is an average of $586,000 per person, according to the IRS data.”
Because these high-income producers are not being taxed to death, they can use all that extra revenue (not that they need it) to buy more houses, build businesses or expand the ones they have, which means they employ people within the state; and the beat goes on. Unlike California, these states are benefiting from the revenue that Newsom foolishly let slip through his fingers for his progressive agendas. The most repopulated ones? Nevada, Utah, Washington, and of course, the states that Hair Gel loves to hate: Texas and Florida.
So much for California “Freedom.”
But it’s not just the well-heeled. Small business revenue used to come in many shapes and sizes in California–like all the independent professionals that used to contribute to the economy, until AB5 put them out of work.
Derek Thoms, who owns several laundromats in California, said he moved his family out of the Golden State to Alabama because of the increase in crime.
Thoms told “Cavuto: Coast to Coast” on Monday that what prompted him to move his family to Alabama included the fact that the state has “low crime” and “more strict laws.”
“They’re definitely not afraid to put people in jail,” he told host Neil Cavuto. “You just don’t have to deal with all the stuff that comes with California,” the business owner added.
Make no mistake, it’s not just the crime, but the poor quality of life in the form of having to walk on eggshells to not misgender, dead name, or perform a microaggression because you ask where someone is from. A community means you get a chance to interact and find common ground with your neighbors. Sadly, the craven need to be WOKE and not offend takes its toll on this too.
“I mean, you have to be sensitive to everyone in California, even especially as a business owner, you really fear even saying the wrong thing to somebody and being boycotted out there,” Thoms continued. “It’s crazy out there.”
He also noted that several of his locations were targeted by those attempting to steal from him, sometimes in broad daylight. The business owner says they often don’t get away with anything, but cause a lot of damage. He captured the incidents on his security cameras, which showed that some of the same offenders come back more than once.
Thoms plans to slowly start up a laundromat business in his new state of Alabama, then quickly work on divesting himself from his holdings in California.
“[I]t is just too expensive to try and move everything.”
Like Mr. Thoms, many business owners do not have the ability to uproot themselves or their families, so they plan to withhold their taxes if the crime and homelessness are not addressed.
From KTVU in San Francisco:
The Castro Merchants Association sent a letter to San Francisco city officials saying they plan to stop paying taxes if The City doesn’t do more to address burglaries, vandalism, people with behavioral health problems and unhoused people camping on the sidewalks in front of businesses and residences.
Bold? More like desperate. No one wants to frequent businesses overrun with feces, needles, and people doing themselves harm. If the Castro Merchants Association does not make a stand, they won’t have any tax revenue to give or withhold.
The Castro Merchant’s Association says they would also like to see more enforcement of laws and a plan for those people who refuse housing or treatment for mental health issues or substance abuse.
In the meantime, Newsom appeared with L.A. mayoral candidate and congresswoman Karen Bass, and Mayor of Los Angeles Eric Garcetti, who crawled out from whatever rock he has been hiding under.
These three made an appearance to tout what they are doing for the unhoused homeless. The image below encapsulates the combined years of failure and tone-deaf response.
In other words, business as usual, until the tax revenues run out.
That may come sooner, rather than later.