California’s economic exodus continues to intensify, encumbering the state’s fiscal health and future. Recent IRS data illuminate the severity of the issue: outmigration drained $24 billion of personal income from California’s economy between 2021 and 2022. The wealthier, family-oriented demographics departing the state starkly contrast with the lower-income individuals moving in, undermining the state’s economic stability and future tax revenues.
California’s net loss of 144,203 tax filers during this period has resulted in a substantial $24 billion decline in adjusted gross income (AGI). The data reveals that those exiting California had an average AGI of $130,946, significantly higher than the $111,689 average AGI of newcomers. Furthermore, departing Californians were more likely to have dependents or joint filers, indicating a flight of affluent families seeking more favorable economic conditions elsewhere.
Former state Senator John Moorlach, a government and pension finance expert, highlighted the broader implications of this trend, emphasizing that the exodus includes entire businesses. As a result, the state isn’t merely losing employees but entire economic operations, exacerbating the issue.
The California Policy Center’s “California Book of Exoduses” reports that 304 companies have left California since January 2019. This mass migration of corporations further underscores the state’s growing economic concern. Despite Governor Gavin Newsom’s recent proclamations of restoring population growth due to increased foreign immigration and slowed outmigration, the financial data paints a different picture. It demonstrates that California is trading its wealthier residents for lower-income individuals, which is not a sustainable path to economic health.
Further compounding the economic turmoil is the state’s job growth report. Since September 2022, California’s private sector has seen a net loss of 154,000 jobs, while the state added 361,000 public sector and taxpayer-supported positions. These figures highlight a troubling trend: the dynamic private sector employment, crucial for robust economic growth, is not expanding as needed. Instead, the state increasingly relies on taxpayer-funded jobs, a shift unlikely to drive sustainable economic growth.
As California grapples with a $47 billion budget deficit, spending cuts or delays in state expenditure may further impact taxpayer-funded employment. This scenario poses a significant threat to employment opportunities for current and future residents, suggesting that the state’s economic environment might deteriorate even further.
The data and trends underscore a pressing concern: California’s economic policies and high tax burdens drive away its wealthiest residents and businesses. This outmigration risks further destabilizing the state’s economic base, posing a challenge that demands immediate and effective policy responses. The critical question remains whether policymakers can implement the necessary changes to reverse these trends and restore California’s economic vitality.
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