California's population decline continues for the third consecutive year, causing concerns among state lawmakers. While it has been argued that wealthy taxpayers have remained in the state, a closer examination of tax filings reveals that even high-income residents are moving out. This exodus of affluent individuals poses a significant challenge for California, a state heavily dependent on the prosperous for income tax revenue.
According to the US Census, California experienced a net loss of 750,000 residents to other states over the past three years. What is particularly striking is that this decline extends beyond the general population and includes a significant number of the state's top earners. The one percenters, comprising approximately 160,000 individuals in a state of 40 million, have been leaving California lately. This departure is notable as these high-earning professionals contribute nearly half of the state's income taxes.
The reasons behind their exodus vary, but one common concern is the state's high tax rates. Many wealthy individuals who possess considerable assets and retirement savings worry about the burden of California's 13% state income tax when they begin withdrawing funds from their IRAs. Consequently, they are opting to relocate to states like Arizona, Texas, Florida, Tennessee, and Nevada, where tax rates are more favorable or non-existent.
In addition to the loss of tax revenue, California is also grappling with a considerable deficit of $68 billion, with a 25% decrease in income tax revenue. This deficit threatens the state's ability to sustain its progressive political agenda, as taxes are the primary source of funding for such initiatives.
The impact of this population shift stretches beyond mere numbers. Tax records indicate that those leaving California for Texas earn an average of $137,000, while Texans moving to California have an average income of $75,000. This discrepancy further underscores the loss of high-earning individuals and the potential economic ramifications for California.
California's challenge lies in devising strategies to retain these high-paying taxpayers while simultaneously attracting others to the state. Currently, there doesn't seem to be a concrete plan in place to achieve this, risking the departure of both young, highly educated individuals and retired individuals seeking to safeguard their finances.
While California can still boast of producing a significant number of billionaires, the loss of these affluent individuals, along with their resources, presents a pressing concern. As the state's economy is intricately tied to the success and contributions of its wealthiest residents, finding solutions to retain and attract high-income earners is of paramount importance.
As the state grapples with its declining population, it remains to be seen how California will respond to the departure of its high-earning taxpayers and bridge the substantial deficit gap.
