[guest post by JVW]
Los Angeles Times (known ’round these parts for some time as the Dog Trainer; just check out the banner at the top of the page) columnist George Skelton acknowledges what observant people have long understood:
It turns out high-income people are also fleeing the state — a new twist in the California exit.
That should worry ruling liberal Democrats who love to tax wealthy people and spend their money, especially on social programs.
Some golden geese are taking flight.
I’m going to overlook the insipid modern journalistic practice of writing a column in which each sentence is its own separate paragraph.
It seems to have been all the rage ever since USA Today started covering complex topics with a grade-school reader narrative.
And end it with a short sentence.
Anyway, it’s long been understood by people who know how macroeconomics works that the more dependent a state becomes upon lots of tax revenue each year coming in from high-income earners, the more likely that state is to see massive fluctuations in revenue from year to year. If you lived here in 2001 and 2009 you certainly recall how stock market woes cut tens of billions of dollars from state coffers. Yet the trend ever since the second — make that fourth, counting his first go-around — term of Jerry Brown, when he abandoned his third-term fiscal restraint and unleashed his inner tax-and-spender, has been to call upon the wealthiest citizens of this fair state to take on more and more of the financial burden for government largesse. As everyone who has read The Giving Tree by Shel Silverstein knows, eventually you are down to a stump, or in this case the tree uproots and moves to Texas.
To his credit, after acknowledging this problem Mr. Skelton makes a mea culpa:
Entering the 21st century, when California’s population was about 34 million, we were predicted to reach 45 million by 2020 and 59 million by 2040. So much for that. We hit a peak of 39.6 million in 2019 and have been losing population ever since.
Until now, we’ve been in denial, telling ourselves that college-educated, upper-income people weren’t leaving. Our progressive tax base and growing economy were secure. The departees were lower-to-middle-income people who weren’t the heavy taxpayers or big job producers.
Everyone seemed to buy into that, although many could cite anecdotal evidence to the contrary.
I plead guilty. This is what I wrote two years ago:
“More affluent people have been moving here than departing. They can afford our escalating costs of living. Political spin about wealthy people abandoning California is fake news.”
In Mr. Skelton’s defense, he was just repeating the assurances from smug left-leaning academics and think tank trolls. This blog busted the eternally annoying Tom Elias nearly seven years ago pooh-poohing the idea that people with high incomes might leave the Golden State for less chaotic destinations. He based this assessment on the work of a think tank which insisted that for every middle-class family leaving California for a more hospitable social environment there would be some techie singles making well into the mid six figures to replace them. Anyone noticed what’s going on at Meta and Amazon recently? Way back in 2016 Mr. Elias cautioned us, “[D]on’t expect the state to lose congressional or Electoral College clout after the next Census in 2020.” We know how that worked out.
For his part, Mr. Skelton really wants to believe that things would be so much better if we only would build more houses to help break the pricing logjam, but he’s honest enough to see that is only a part of the problem. He quotes a researcher from the Public Policy Institute of California who bluntly asserts that taxes play a key role here:
The net loss of high-income people is relatively small, [Eric] McGhee says. But the number leaving California “increased dramatically” to 220,000 in 2021, he reports.
It wouldn’t take many fleeing rich people to hurt the state treasury. The top 1% of earners pay nearly 50% of the state income taxes. The top 10% kick in roughly 80%.
“Taxes definitely are part of the story” why high-income people are leaving, McGhee says. “Taxes is the last straw that pushes them over the edge.”
Delusional Democrats in Sacramento seem to think they can extort another $20 billion out of state residents who have at least $50 million in total wealth, while the governor can only come up with small-bore “soak the rich” proposals consisting of closing an out-of-state trust loophole which would likely at most net the state about $20 million towards the $267 billion budget. Given the huge financial hole the state finds itself in, Sacramento is going to find itself desperate to snatch any revenue they possibly can, especially since the California Legislative Analyst has already declared that Greasy Gavin’s proposed 2024 budget is “likely unaffordable in future years,” and “there is a two-in-three chance that state revenues will be lower than the governor’s budget estimates for 2022-23 and 2023-24.” Lots of luck to the supermajority in trying to reconcile all that. It’s highly unlikely that the Democrats are going to con the super-rich into picking up the entire tab.
And I haven’t even gotten around to kvetching about the High-Speed Rail Authority.