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Published December 22, 2023 8:00am EST


WEALTHY CALIFORNIANS ARE FLEEING THE STATE, PUTTING TAX REVENUE AT RISK


40% OF CALIFORNIA'S TAX REVENUE COMES FROM EARNERS IN THE TOP 1%

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 * Comments
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By Aislinn Murphy FOXBusiness
California used to be the ‘heartbeat’ of America, now it's only a ‘murmur’:
Steve Garvey

California Republican Senate candidate Steve Garvey joins ‘The Big Money Show’
to discuss the impact that Democratic policies have had on the state.

The population of California posted a decline of tens of thousands in 2023.
Among them are some of the wealthiest Californians, who account for a sizable
portion of the state's tax base. 

The state’s population dropped by about 75,400 over 12 months, bringing it to
over 38.96 million as of July 1, the U.S. Census Bureau estimated Tuesday.

Those figures were part of a wider release from the Census Bureau regarding the
population of the country as a whole and its 50 states.



Shipping cranes stand at the Port of Oakland in front of the San Francisco
skyline in Oakland, California, on Oct. 24, 2022. (Justin Sullivan/Getty Images
/ Getty Images)

Tax Foundation Vice President of State Projects Jared Walczak told FOX Business
in a Thursday afternoon interview that California’s migration numbers were "even
more stark" than the newly-released population figures.

GOV. NEWSOM ADDRESSES CALIFORNIA EXODUS, TELLS AMERICANS ‘DON’T COUNT US OUT'

California had a total of over 399,400 tax returns leave the state and over
241,200 come into the state in 2020-2021, resulting in a net loss of about
158,200, according to IRS migration data. For individuals, the IRS said the
state netted over 331,700 fewer people in that time frame. 



"California has led the nation for years in out migration and, recently, in
outright population decline," Walczak said. "California is one of only a handful
of states that is facing a budget deficit, and one of only a very small number
that has seen tax revenues reversed in the past year. Most states continue to
see rising tax revenues."

Earlier this month, the Legislative Analyst’s Office projected California could
see a budget deficit of $68 billion for the upcoming fiscal year if not solved. 

Aerial view of the city of Fremont, California. (iStock / iStock)

It linked that deficit largely to a "severe revenue decline" that involved a 25%
drop in total income tax collections in 2022-2023. Things like the postponement
of certain tax payments and economic weakness played into that, according to the
office’s report.



Walczak said that part of the state’s revenue decline "is because they are
increasingly seeing not just population decline, but some of their wealthiest
and most significant taxpayers leave the state."

Between 2020 and 2021, there was a net of over 27,300 fewer tax returns in
California that reported an adjusted gross income of at least $200,000, the Tax
Foundation found, citing IRS migration data.

NEW YORK, CALIFORNIA EACH LOST $1T IN ASSETS AS FINANCIAL FIRMS FLED SOUTH



California "has now gotten to the point where they’re seeing an actual decline,
which is extremely rare, but has long seen a net out migration," he said. "It’s
not a coincidence that California poses some of the country’s highest taxes at a
time of much greater tax competitiveness when 29 states have cut individual or
corporate income taxes in the past three years. California is only one of a
handful to have actually raised taxes."

Economic factors like the cost of living and the housing market have also
contributed to people moving out of California, and so has remote work,
according to the Los Angeles Times.

Roughly 40% of revenue that California brings in on a yearly basis from personal
income tax comes from the top 1% of taxpayers in the state.



The population decline could put the long-term funding prospects of some
California programs at risk, according to Walczak. 

Aerial view of the California Capitol.  (Visions of America/Joe Sohm/Universal
Images Group via Getty Images / Getty Images)

"Not only is the state highly exposed to fluctuations in the stock market, but
it’s also heavily reliant on the wealthiest taxpayers and if they leave the
state, the impact is substantial," he said. "California also has expansive
government programs that rely for funding not only on these high net worth
individuals but on the idea of continuing population growth and employment
growth. The way you pay for the benefits in a state like California is by the
next generation earning more than the last and paying more into the system."

CALIFORNIA MIDDLE-CLASS FAMILIES HIT WITH $26K COST-OF-LIVING PENALTY: REPORT



For California’s $68 billion budget deficit, the Legislative Analyst’s Office
posed drawing from its $24 billion in reserves, reducing Proposition 98 spending
and other measures as possible solutions.

In addition to California, the populations of seven other states went down in
2023, the U.S. Census Bureau said Tuesday.

The nation as a whole reached a population of 334.9 million in 2023, according
to the bureau. It hit that level after growing by 1.6 million people in a
12-month frame.




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