By Alexis Grace
California has been the favorite destination for the brightest minds, entrepreneurs, innovative companies, media personnel. They were pulled to educational, media, and entrepreneurial hubs. However, in the recent past, the state has become the fifth-largest state responsible for outbound migration. Numerous people are moving out of California to evade high taxes.
Why are the people choosing to move out?
Large companies like Hewlett-Packard, Digital Realty, and Oracle have opted for moving out of California even though it is the second most innovative state in the U.S.A. The state has one of the highest corporate tax rates. It also stands as the second most expensive state to live in. high transportation and housing prices of California have led individuals and companies to choose Texas as the destination for a relatively low tax burden.
53% of Californians left the state for high living costs and relocating to Texas, Nevada, and Washington.
Californians are interested in paying lower taxes.
Surprisingly, prominent individuals like Elon Musk, Larry Elison, Joe Rogan, and notable venture capital investors like Jim Breyer and Joe Lonsdale moved out of California in 2020. The current pandemic has forced people to work remotely from home, and the trend has made it easier for new talents to live outside of Silicon Valley.
California has a 13.3% tax rate for people with more than $1 million income, i.e., the highest marginal tax rate in the country. On the other hand, wealthy individuals and business tycoons prefer Texas, where there is no income tax burden.
As per the U.S Census Bureau, the population of Texas has grown by 1.29% between 2019 and 2020. Texas has become an attractive destination for affordable housing, a strong economy, and an extensive higher education system. Numerous large tech companies are getting interested in Texas.
Other issues responsible for out-migration in California
During the 2010s, California has experienced the slowest growth rates, which have led to a lower birth rate, more death rate, and unprecedented loss of a seat in the House of Representatives. In the last decades, the state had in-migration of 4.9 million people while witnessing an out-migration for around 6.1 million people.
Adults of highly educated and high-income groups are moving in while the state is losing its lower and middle-income residents due to the economic hardships.
The highly paid young adults contribute to the state tax revenue and use comparatively few social services. However, California must think of bringing some changes to its public policies. Resolutions are essential for the state to be an opportunity for all the residents.
Conclusion
The key reason behind California’s outbound migration is its enormously high housing cost and progressive and increased personal income tax rate. When the state lowers its home prices and taxes, it’s highly likely to cause an inbound migration. Since California still dominates in terms of capital and talents, it will not change anytime soon.
