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.