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Wednesday, December 20, 2023

California: The Exodus of the Affluent

 Don Lee at LAT

In 2021 and 2022, about 750,000 more people left the state than moved in, according to recently released Census Bureau data. That was about as many as the total net loss of residents for all five years before the COVID-19 pandemic in early 2020.

But it’s not just the sheer numbers of people who have left. What’s different is that in each of the prior two years, more than 250,000 Californians with at least a bachelor’s degree moved out, while an average of 175,000 college graduates from other states settled in California, according to an analysis of census data by William Frey, a demographer at the Brookings Institution.

In prior periods over the last two decades, that balance was about even or slightly in California’s favor, even though the state consistently lost many more residents overall to other states than it gained from them. The recent out-migration has been particularly pronounced among Californians with graduate and professional degrees.

California is heavily dependent on high earners to meet government fiscal needs. Tax filers in the top 1% of income, earning around $1 million and above, have typically accounted for 40% to 45% of the state’s total personal income tax revenue, said Brian Uhler, deputy legislative analyst at California’s Legislative Analyst’s Office, which estimated the $68-billion budget deficit.

In the tax filing years 2020 and 2021, the average gross income of taxpayers who had moved from California to another state was about $137,000. That was up from $75,000 in 2015 and 2016, according to migration and personal income data from the Internal Revenue Service.

IRS and other data show that Texas has long been, by far, the top destination for Californians. And in the years 2015-16, an individual or couple who had moved from California to Texas reported an average income of $78,000, about the same as Texans who relocated to California. But by 2020-2021, California transplants in Texas reported an average income of about $137,000, while tax returns from former Texans who moved to California showed an average income of $75,000.

The income gap between those coming into California and those going out is even bigger when it comes to Florida, which, as far away as it is, has become a top five destination for emigrating Californians. Statistics show more older Californians are likely to move there. Florida, like Texas and Nevada and Tennessee, another more recent hot spot for Californians, doesn’t have a personal income tax.

In California, the top tax rate for personal income is 12.3%.