Why are people leaving California? It’s not the taxes.
People are leaving California, and despite what you may think, taxation and regulations are not the cause.
From 2018–2019, California saw nearly 200,000 domestic residents fleeing the state for Texas, Arizona, Nevada, and Oregon. In raw numbers, these are the highest in the nation. For months, this had been used to push back against the high taxes and high regulations enforced by the State’s government.
Since people are suddenly leaving the highly regulated state (California) for the Laissez-Faire state (Texas), it says many things about right wing policies being largely more successful.
This is a flawed argument.
To see why, it is important to look into the history of taxation & taxation rates in the state of California. According to the California Department of Tax and Fee Administration, the combined effective Sales tax and Income tax rates in the State of California have remained consistent since late 1989.
There has been no correlation between net migration and tax rates since then. California has experienced multiple time periods since 1989 with high net migration, but has also (more recently) experienced multiple time periods with lower net migration.
Another note to consider, is the fact that not everyone is leaving California for Texas. In fact, here is a chart showing which state takes in the most Californian ‘refugees’.
Right off the bat, we notice that Texas and Arizona are the highest on the list. However, what many fail to consider, is that a sizeable percentage of Californian refugees, nearly five hundred thousand in total, have fled to highly taxed and highly regulated Oregon. If you live in Oregon and have an income below 100,000 a year, you will pay more taxes in Oregon than if you lived in California.
Even though Oregon does not take as many refugees as Texas or Arizona, it ranks significantly higher than Texas when it comes to per-capita migration from California. Oregon has about 4,000,000 people, compared to Texas’ 29,000,000 as well as Arizona’s 7,290,000.
Here is a map of Californians Per Capita in each state.
For even more evidence that it’s not taxation that’s causing the issues, we must note that Coastal Californian areas such as Los Angeles County, Orange County, and Santa Clara County, have seen a significant population decrease, while Counties such as Fresno, Merced, San Joaquin, and Sacramento have all seen an increase in population.
The image below is very telling:
We can see that places with higher costs of living and higher housing prices are losing population, while places with lower and cheaper by comparison prices are gaining population.
According to the LA Almanac, the average price for Single Family Residence in Los Angeles is about 240% more than the average price in Fresno.
Moreover, Taxes in California are almost always re-invested in the community. This is because taxes, state and local taxes in particular enable states and local governments ability to invest in their people and create jobs. This perhaps plays a role into why California’s GDP Growth Rate in 2019 was nearly twice of Texas’, and the highest in the nation.
Okay… Maybe it’s not the tax rates. What about regulations and the socialist governor’s inconvenient business policy?
This is another common myth that is quite easy to debunk. An informative piece by StateLaws, states that regulations in california exist primarily to prevent:
“deceptive business practices; environmental regulations, such as waste and pollution controls; securities fraud; insurance and liability; contracts; and employment”
Despite what the right will tell you, nearly all of these regulations listed above are common-sense regulations that do not affect the average small business owner.
If you believe in regulation in the form of taxation, i recommend scrolling up and reading the things i have written above.
Now that we’ve pointed out what is NOT the cause of the issue, let’s look at precisely what is the cause.
Housing Prices and Cost of Living
As mentioned above, post-industrial cities in California such as Los Angeles and San Francisco are seeing significantly lower population growth rates, than the developing areas of Fresno and San Joaquin.
Migration patterns within California suggest that people from SF, Santa Clara, LA, Ventura, and Orange are moving to lower cost areas such as Kern, Fresno, Merced, and Sacramento.
According to the same source, since 2010 to 2020, the average house price in Los Angeles County increased from 399k to 720k, which is a near 80% increase.
At the same timeframe of 2010 to 2020, California experienced its greatest “exodus” where exits were on their longest streak of rising since the state began compiling statistics in the 1940s.
According to polling data from Edelman Intelligence, 60% of Californians say that they are seriously considering moving out of California, while 53% of Californians cite cost of living as the major push factor.
California is about 3–4 million units short of housing.
Rent in San Francisco can cost upwards of 5–6k a month, meanwhile in Texas, it’s near 5–6k a year, meanwhile the minimum wage in SF is $15.59/hr, not even close to a survival wage.
As for the final nail in the coffin, here’s a graph of Out-Migration to Housing prices. It’s very obvious which push factor is more prevalent.
Don’t get me wrong, I am not saying that taxation is not a push factor, I am simply stating that taxation is not the largest, nor is it a major factor that the government should pursue to address. High taxes may push some people to leave the state, but the fact of the matter is that the vast majority of people are far more concerned with rising costs of living.
The government of California should be far less concerned with taxes, and far more concerned with the rising costs of living and poverty rates. The patterns have shown that if our government does not act now to take rapid action to combat poverty, I have no doubt that California will not keep its reputation as The Golden State.
Written by CAHSD member Kavin Ganesan.
