More than $102 billion in income left California from 2020 to 2022 as people migrated to other states, according to Internal Revenue Service (IRS) data cited in a July 31 report (IRS Data Show Pandemic Uptick in Outmigration Continues, ca.gov) from the Legislative Analyst’s Office (LAO).
“The number of taxpayers who move out of California each year ticked up in 2020 with the beginning of the pandemic,” the report noted. “At the same time, the number of taxpayers who moved to California remained flat. Recently released IRS taxpayer data from 2021 and 2022 shows this trend has continued.
“As a result, annual net outmigration to other states nearly doubled – from about 170,000 people (taxpayers and their dependents) in 2019 to closer to 300,000 people – since the pandemic began. The state has long had annual net domestic outmigration, but the recent migration gap is now as large as the early 1990s gap that occurred when defense and aerospace contractors downsized after the end of the Cold War.”
Prior to the pandemic, statewide outmigration was concentrated among lower-income households. Since then, more middle- and higher-income households have moved to other states, meaning the effect on state revenue has been greater because these tax filers tend to make larger income tax payments.
”California income tax revenue declined 27 percent in 2022-23, but the loss attributed to outmigration likely was only a small contributor to the large revenue losses,” the LAO stated.
“Ongoing outmigration at this level would be a drag on long-term revenue growth for the state,” the LAO added. “Over the last few years, outmigration has been a drag on Personal Income Tax (PIT) revenue growth of about 1 percent per year.”
The IRS tracks the adjusted gross income of taxpayers who move each year. The net flow of taxpayer income from California since 2020 “has been concentrated in Southern states” – primarily Texas ($14 billion), Florida ($8 billion), and Tennessee ($3 billion) – and neighboring Western states, the analyst reported.
Nevada gained $10 billion in income from former Californians, Arizona gained $7 billion, and Oregon gained $3 billion, the data shows.
This news comes at the same time a UC Irvine poll recently released (Latest UC Irvine-OC Poll finds residents considering relocation – UCI News) indicating that more than a third of Orange County residents are actively considering moving somewhere else. The reasons for this are the same concerns for most living in South Orange County: the high costs of housing and basic necessities, including food, gas, electricity, health care and child care. Even those who have planned for retirement and are on fixed incomes share anxiety about their ability to afford a quality of life they have grown accustomed to as Orange County residents.
An LA Times story on the poll quotes a new mom saying that she and her fiancé are looking to move with their 9-month-old son to Sacramento, despite having well-paying jobs, extended family close by, and wanting to stay with their support community and enjoy an ideal place to raise kids.
The poll found more than 50% of respondents are considered “potential leavers,” with women, people under 40, non-White residents and those without a college education being more likely to depart than others.
UCI School of Social Ecology Dean Jon Gould led the study. “What the poll is telling us is there’s a giant storm that’s brewing that may very well unleash itself on the county with the problem of the lack of affordable housing,” Gould reported.
The poll indicated that the cost of housing was the biggest concern at 78%, followed by concerns of the cost of living at 76%. Quality-of-life issues came next, including taxes, crime, traffic, the job market, the political climate and access to family in other parts of the state.
State government laws requiring costly regulations for housing have detrimental effects on affordability. At the same time, the state requires cities to build new units – another expensive mandate.
When the state loses tax revenue, funding for vital services such as public safety, emergency services, education and health care is jeopardized. I am working in Sacramento to advocate for legislation and policies that help keep California residents here and improve their quality of life.
Laurie Davies is a small business owner and former mayor who was elected to the State Assembly in 2020 and reelected in 2022. She represents the 74th Assembly District, which includes San Clemente, Dana Point, Laguna Niguel, and San Juan Capistrano in South Orange County—down through Camp Pendleton, and Oceanside, Vista and part of Fallbrook in North San Diego County. SC