California's high taxes force citizens to migrate

California has one of the largest exoduses in its history for years. Tens of thousands of people leave the state due to the high cost of living. In 2021, Los Angeles County had the largest net fiscal loss due to migration: more than 74,000 people moved to nearby areas with lower living costs, and others left the state altogether.

Strict business regulations and poor quality public services are possible reasons for the population decline . In addition to that, it is the increasing tax burden, which contributes to migration trends. Per capita public spending has increased in California by 52% from 2000 to 2019. And, although it is considered "the world's fifth largest economy," a fiscal crisis is inevitable.

Income most affected by taxes

For low- and middle-income individuals, California exit rates have been changing over time. According to the report, 'Taxes and Net Migration in California', by Joshua Rauh, the percentage of the lower income population that has migrated out of the state has remained in the range of 0.90% to 1.5% over time. Likewise, middle-income earners between $51,530 and $263,222 have been leaving California at slightly higher rates: it has grown from 1.64% in 2003 to 2% in 2018.

Higher incomes reached two peaks in state dropout rates, coinciding with two measures of a fiscal nature: in 2012 by the passage of the Proposal 30 and in 2017 following the implementation of the deduction cap. SALT by the Congress and, the approval of the TCJA (Tax Cuts and Jobs Act), which amended the Internal Revenue Code 1986. In both cases, the rate of flight from the state exceeded 2%.

Preferred destination states

After the passage of Proposition 30, people increasingly moved to states such as Florida, Texas and Nevada, which have lower taxes. Texas surpassed Arizona and Nevada as the most popular destination among migrants and remained in the lead through 2019. From 2011 to 2016 alone, the Lone Star State gained 100,000 residents, while California lost more than 30,000 people from this group.

Since 2016, Arizona has also become an increasingly popular destination for people choosing to leave California. In 2019, 9.7% of migrants headed to the Arizona border, 8% went to Nevada, and another 8% moved to Washington. Florida was the fifth most popular destination in 2019, with 7.7% of high-income taxpayers leaving.

Today, the pattern holds true. Most people who choose to start their lives in another state prefer cities with low taxes, and the favorites continue to be Texas, Arizona, Nevada and Idaho.