California Exodus: 2023 version

As we ease into the end of the year, it is a time to reflect on the major trends of the year and assess what they mean for the future.  The elephant in the California room is out-migration, particularly of the people who foot the California tab which is large and growing.  We touched on it in July of 2020 here.  And again in October of 2022 here.  So none of this is news--the news is what little Newsom and the Legislature are doing about it.

State budget analysts recently projected a record $68-billion deficit in the next fiscal year because of a 25% drop in personal income tax collection in 2023. Some city, county and other local taxing authorities, particularly in the San Francisco Bay Area, have also recorded revenue declines.

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.

Moody’s Analytics economist Mark Zandi analyzed moves in and out of California for The LA Times using Equifax credit data, to zero in on the age of the movers. He found that since the pandemic in early 2020, California has lost residents in every age group, but by a significant margin the biggest net out-migration came from those 35 to 44 years old.

Pundits on the Left AND the Right (looking at you WSJ) point to restrictive building codes as a key factor, but I think it is way down the list.  In fact, I'll bet a lot of departures are due to the reverse--over-development and all the quality of life problems it brings.  Or the sense that your single-family neighborhood is threatened by the Yes In Your Backyard crew--YIYBYs.  Right behind that are the oppressive taxes on the high earners and the little tricks being played like the Death Tax that slipped through last election.  Pile on the singularly stupid things like fining stores if they don't have a "gender-neutral" toy section or outlawing gas stoves that causes ridicule from friends all over the country and you have a Perfect Storm.

As I said three and a half years ago on the first linked post, this is not likely to change any time soon.  There maybe a Black Swan event at some point but they are intrinsically unpredicted.  All we can do it keep talking/posting about it and hope the politicians wake up to reality.  When the effects of the bad policies noted here finally come home to roost, it may be too late.

Comments

[Phinancier]

The pols better start thinking out of the box on insurance costs. And I don't mean demonizing the insurers. See how well that has worked?

[Citizens for Affordable Pizza]

Higher minimum wage prompts Pizza Hut to lay off staff drivers.

[Joe]

From the Merc:

As Insurance Commissioner Ricardo Lara embarks on a politically risky bid over the coming year to stabilize California’s imploding home insurance market by making it easier to raise premiums, homeowners in fire-ravaged communities seem resigned to a grim fate. In a state already grappling with unaffordable housing, the cost of insuring homes in much of California is about to get a lot higher.

Companies such as State Farm, Allstate and Farmers Insurance stopped issuing or limited new policies throughout much of the Bay Area last year and notified homeowners that their policies would not be renewed. For many, the only options are an expensive state-mandated policy known as the FAIR Plan, offering minimal coverage, or no insurance at all — if they don’t have a mortgage that requires it.

Insurers now must base rates only on historic losses, not projected risks, and approval for requested increases takes more than a year — twice as long as in Florida and four times as long as in Texas, according to the December Property Insurance Report by industry data analysis service Risk Information.

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Elsewhere I read that State Farm is preparing a +20-25% increase for 2024.

[MBGA]

This April we'll be paying tax on our home sale, and that’s it. We are Floridians now, and loving it.

[Joe]

I hope you and Barking Dog will continue to watch the Voice and add your thoughts. Best of luck MBGA, whoever you are :-)

[MBGA]

I've been doing so for the last couple years while 80% in Florida. Now we are 100%. I'll still be checking out the site but mostly for your pictures and good memories. But the local issues discussed blessedly won't feel the same.

[Joe]

Sounds good, MBGA. Did you use a U-haul? :-)

Texas netted the largest number of movers in one-way U-Haul® equipment in 2023, marking the third consecutive year it has finished atop the U-Haul Growth Index.

Florida ranks right behind Texas among growth states for the third year in a row, followed by North Carolina, South Carolina and Tennessee.

Idaho, Washington, Arizona, Colorado and Virginia round out the top 10 states for growth.

For the fourth year in a row, California reflected the largest net loss of one-way movers. Other bottom-five states for growth are Michigan, New Jersey, Illinois and Massachusetts. New York ranks 43rd.

https://myuhaulstory.com/2024/01/02/2023-uhaul-growth-states-texas-and-florida-top-list-again/

[Joe]

I won't make a habit of double posting, but this comment deserves two locations:

The latest Exodus numbers are in for 2022 and it's not looking good for the formerly Golden State. Newsom is busy positioning himself for a promotion while Rome burns. Here's the tale of the tape:

The IRS last week published its annual data on the migration of taxpayers and adjusted gross income (AGI) between states. California ranked, again, as the biggest income loser ($23.8 billion) in 2022, followed by New York ($14.2 billion), Illinois ($9.8 billion), New Jersey ($5.3 billion) and Massachusetts ($3.9 billion).

California lost nearly three times as much income in 2022 to other states as it did in 2019. (Cumulative loss of AGI 2019-2022 are -$80 billion).

California Gov. Gavin Newsom assails these states as cultural backwaters. Yet California lost income in 2022 to most Republican-led states, including Texas ($5.4 billion), Florida ($2.9 billion), Tennessee ($1.5 billion), Utah ($940 million), South Carolina ($370 million) and Alabama ($140 million). Why are so many fleeing the Golden State?

Blame in part its high energy and housing costs. Electricity costs two to three times as much, and gasoline $1 to $2 a gallon more, as in states without burdensome climate mandates. California’s median-priced home ($860,500) is double that of most states owing to a housing shortage caused by zoning restrictions and environmental laws.

Mr. Newsom hailed the “California dream” in his State of the State speech last week, but its crime and vagrancy are a nightmare. Buying a home is becoming harder for young people in California. The Governor also claimed red states “tax their lowest earners far more than California does.” And he calls Donald Trump a liar?

California’s gas taxes are the highest in the country. It taxes middle-income earners at a higher top marginal rate (9.3% at $68,350) than most states do millionaires. Texas and Florida have no income tax. Sales taxes in most GOP-led states are also lower than in California. As are property taxes because home prices are lower.