This summer, Some new numbers highlight how much revenue California has lost due to outward migration in the past three to four years.
According to a report in the national real estate website, MyeListing.com, California ranks number one in states with the largest net negative tax income migration, losing $343.2 million in state revenue in 2021.
New York came in second, reporting a $299.6 million loss, and Illinois third with a $141.7 million exodus.
A handful of blue-run states in the Northeast and Midwest rounded out the top ten, including New Jersey, Massachusetts, and Michigan.
All that money is going somewhere, and the trends are toward more red-led states across the South and Southeast. Florida, Texas, and Arizona were the top three net earners in the country, followed by Colorado, the Carolinas, Tennessee, Utah, and Georgia.
Florida had the largest net positive tax income migration scoring $12.4 billion, followed by Texas at $10.7 billion and Arizona, which brings in $9.4 billion in extra tax revenue.
This reflects the trend of high wealth earners leaving the states with high taxation rates for more tax-friendly environments.
“Despite its numerous attractions, from the booming tech industry and world-class universities to beautiful landscapes and cultural richness, California’s high personal income tax rates seem discouraging for many high-wealth individuals,” the MyEListing study found, warning that if this trend continues, it could fuel a “wealth migration” out of California.
Florida, as the study noted, has become a hotspot for “individuals and families with substantial income and assets.”
“High-income earners are increasingly choosing the Sunshine State, reflecting an age-old economic axiom: Money goes where it is treated best.”
California Tax Structure
California has a progressive income tax system with nine tax rates ranging from 1% to 12.3%.
The top marginal rate in California is 13.3%, which is the highest rate in the U.S., but only applies to income earners with over $1 million in taxable income. These, however, are the people that are leaving the state and taking their wealth with them.
According to Statista, in 2020, California had the highest number of millionaire households in the U.S., with 1.14 million households having one million or more in investible assets.
This means California is losing a lot of its potential to collect revenue when these top earners begin leaving the state.
Where Do the Dollars Go?
It might be safe to assume that top earners would not mind expending a little more cash to ensure their streets were safe, their children could go to public schools that produced competitive graduates that could easily matriculate to higher education if they chose to, and those who were down and out on their luck would receive the help they needed.
However, that doesn’t seem to be the case.
Despite its once large tax base, the Golden State under Governor Gavin Newsom can’t seem to get homelessness, crime, and drug use under control, it consistently ranks below average in reading and math in the Nation’s Report Card assessments, and is wasting billions of dollars on a high-speed rail that takes people from where they don’t want to be to where they don’t want to go.
To alleviate some of its toughest challenges, California has drained its almost $100 billion surplus in 2022 to result in an over $30 billion deficit in 2023. Not even a Real Housewife can spend that much money in a year.
Accounting for this loss and the ills that continue to plague California will be a problem for Governor Gavin Newsom as he ramps up his efforts in his shadow campaign for president. Despite the political song and dance shows that continue to distract the public, the real concern for most Americans right now is the economy and inflation, followed closely by crime.
These are not exactly Newsom’s strong points and it will be interesting to see if and how he defends California’s policies against his number one competitor, Florida Governor Ron DeSantis in the newly scheduled debate.
Jennifer Galardi is the politics and culture editor for 19FortyFive.com. She has a Master’s in Public Policy from Pepperdine University and produces and hosts the podcast Connection with conversations that address health, culture, politics and policy. In a previous life, she wrote for publications in the health, fitness, and nutrition space. In addition, her pieces have been published in the Epoch Times and Pepperdine Policy Review.