Wealthy People are Ditching California
California is no stranger to migration; American residents have been moving to and from the state for years.
Historically, most of the people leaving were low-income, and most of those arriving had money to spare. But the newest data shows that wealthy Californians are now leaving the state, which could cause some serious problems.
Why Are So Many Californians Moving Away?
For years, California was considered one of the best states in the country. With beautiful beaches, cities with growing economies, and perfect weather, there was nothing not to love.
But now, the state is struggling; with exorbitant taxes, higher housing costs, increased cost of living, and companies leaving the cities left and right, California is now considered one of the worst states to live in.
The Tech-odus, Layoffs, and Growing Unemployment
First, California is struggling to hold onto its citizens as many major companies are fleeing the state.
Tech companies such as Microsoft, Vrbo, HP Enterprise, Tesla, Oracle, and so many more have already left, leaving behind empty real estate and hundreds of thousands of unemployed residents.
Inflation Affects California Residents More than Others
In addition, it’s important to understand that while all Americans are facing the consequences of inflation, those living in California are seeing it more than almost anyone else.
The cost of gas, groceries, utilities, clothing, and electronics seem to be increasing by the day, and without a significant increase in salary, it’s becoming almost impossible to live comfortably.
It Costs a Fortune to Buy a Home in California
One of the major issues is that it is becoming increasingly expensive to purchase a home in the state of California.
High Housing Costs Are Pushing Out Young Professionals
For those who already own a home in California, this isn’t really a problem. The issue is for young professionals who are looking to buy their first house.
And the numbers prove it; the largest percentage of Californians who left in 2023 were between the ages of 35 and 44 years old.
California Taxes Are Forcing Even Wealthy People Out
But many argue that it’s really the taxes, specifically the income tax, that makes so many Californians want to leave. And since other states, such as Nevada, Texas, and Florida, don’t even have a personal income tax, it just makes financial sense to move.
The problem now is that California depends on the income tax of the millions of wealthy residents it has to operate.
The Top 1% Made Up 40% of California’s Income Tax Revenue
Of course, wealthy entrepreneurs at any level leaving is bad news for California, but when big names such as Elon Musk move out, that really hits the state hard.
In the past, the top 1% of residents who earned at least $1 million made up 40%-45% of the entire state’s personal income revenue, and without them, the state will certainly struggle.
Where Are Californians Going?
In order to find a lower cost of living, cheaper homes, and an extreme decrease in taxation, previous California residents are moving to states such as Nevada, Texas, and Florida.
These states not only have affordable homes for sale, great cities, and beautiful weather, but they also have absolutely no personal income tax.
California Will Make Far Less Money This Year
According to California’s Fiscal Outlook report, the state has seen an almost unbelievable 25% decrease in personal income tax collection this year.
With this significant decline, along with revenue decreasing around the state, California is expecting a $68 billion deficit next year.
California May Bounce Back
Some say that the state will be able to come back from this horrific deficit in the very near future.
In fact, the state government assumes that by 2025-2026, they will be operating at around a $30 million deficit instead. However, these numbers are only projections; no one really knows what will happen next.
To Save the State, California May Have to Raise Taxes
An economics professor at Loyola Marymount University, Sung Won Sohn, explained what might happen next for California. He said, “It’s probably going to be some combination of cutting back spending and raising taxes.”
He continued, “But if we keep raising taxes, we’ll keep chasing people away from the state.”