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California Exodus

A couple of months ago, I shared a piece on the exodus of Chinese rich.  Last week, WSJ had an intriguing interview with Joel Kotkin, one of the US premier demographers, on why Californians have been moving out the state for the past twenty years.

California used to be a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas' iconic "California Dreamin'" and the Beach Boys' "California Girls."  But it also attracted young, ambitious people "who had a lot of dreams, wanted to build big companies." Think Intel, Apple and Hewlett-Packard.  "California is God's best moment," says Joel Kotkin. "It's the best place in the world to live." Or at least it used to be.

However, according to Mr. Kotkin, nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving… most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

Kotkin blamed government and the red tape.  "The first thing that comes to many American minds when you mention California isn't Hollywood or tanned girls on a beach, but Greece", says Mr. Kotkin, "Many progressives in California take that as a compliment since Greeks are ostensibly happier".

The other factor is high taxes.  According to the Tax Foundation, California has the 48th-worst business tax climate. Its income tax is steeply progressive. Millionaires pay a top rate of 10.3%, the third-highest in the country. But middle-class workers—those who earn more than $48,000—pay a top rate of 9.3%, which is higher than what millionaires pay in 47 states.

"Basically, if you don't own a piece of Facebook or Google and you haven't robbed a bank and don't have rich parents, then your chances of being able to buy a house or raise a family in the Bay Area or in most of coastal California is pretty weak," says Mr. Kotkin.

While many middle-class families have moved inland, those regions don't have the same allure or amenities as the coast. People might as well move to Nevada or Texas, where housing and everything else is cheaper and there's no income tax.

Call it the Great Exodus of California.  This is very unfortunate.