One of the most common forms of online clickbait these days is reporting on the best places to live — best for families, for retirees, for pet owners pets, and so on. Whenever I see these “studies”, some based on questionable parameters, the first thing I ask is, “Do they match the facts?” In other words, have many people migrated to these places—and if not, why?
That was on my mind when I came across a recent study on the cheapest states for the middle class. “If you’re moving to one state in the future,” the study says, “you can save a lot of money by moving to one of these states.” But California landed on the Top Ten list, which rarely ranks people for tax-free states. Even the author of the report seemed surprised. “Wait, what? California is tax-friendly government?” they asked. “Yes. . . for middle-class families.” The reason for this order, according to them, is that the state income tax on high incomes is at a flat rate but charges a fee for everyone. A recent study, for example, found that income taxes take, on average, nearly 10 percent of family income from the highest earners in the Golden State, but only 1.2 percent of the average population. Even higher taxes elsewhere, such as gasoline, do not compensate for these benefits.
My first reaction to this good news about California was to wonder why, if it is a tax haven for the middle class (and especially for low-income households), so many people are in a hurry to leave. California has the highest rate of domestic migration among the states, meaning more residents are leaving than coming in—and they’re leaving by the hundreds of thousands every year. You can only have that kind of immigration from the top investors—certainly not from the top 1 percent, who are the targets of the highest tax rates. In fact, most vacationers are low- and middle-income people. And the loss of the middle class has increased in the past five years to about 200,000 in the main population. At the same time, about 300,000 low-income California adults left at that time, many taking their children with them.
Advocates of higher taxes say that people don’t move because of taxes. It’s true that in surveys asking people why they move, immigrants cite many reasons, including housing costs, economic opportunity, and the pursuit of a better life in general. However, there is a close correlation between the list of the highest tax states and the number of states people move to. The correlation is so striking that several years ago Gallup noted, “Even after controlling for various demographic characteristics including age, gender, race and ethnicity, and education, there is still a strong relationship between the total tax burden and the desire to leave the current state. residence.”
What is happening shows how important the tax is to immigration, but not always in a simple way. Taxes do not exist in a vacuum; they are an element of the governing philosophy. High taxes represent a trend that favors larger and more widespread government, which has many other forms besides taxation: a tendency toward greater control and prioritization of spending over that of low tax states, for example. The results at the extreme (and politicians in California like to boast that they are in the extreme these days) have a profound effect on all the other factors that drive people to immigrate. [Not sure I recognize use of extreme bere]
An obvious example is housing costs. A recent survey found that 37 percent of Californians are considering leaving the state for this reason. California has the highest home prices of the 48 continental states, and the government has something to do with it. Although the state needs to build about 180,000 units a year to maintain an adequate supply, it produces only about two-thirds of that number, and shortages have persisted for years. The cost is astronomical, even for government-subsidized affordable housing. According to a recent study by the Treasury Board, the average cost of building a residential home is about $700,000.
Recently, the Los Angeles Times It appears that construction costs for a few new housing projects have risen by $1 million per unit. Although the supply problem is reflected in rising costs, the newspaper also blamed these alarming numbers on strict environmental standards and government personnel regulations. , as well as “excessive parking requirements, lengthy local approval processes and byzantine red tape to get funding. ” Given these dynamics, the amount of money the average family could save in income taxes won’t go far enough to pay down mortgages on Golden State homes that have skyrocketed in value due to the shortage. the government.
Because of its high taxes on investors and corporations, California has a huge budget. The general fund alone amounts to 200 billion dollars. You might expect, for this money, the highest level of service from the government, but the opposite is true. The role of a government agency that has a significant impact on the quality of life for individuals is basic infrastructure. California is consistently low on this important measure, and not alone. Other high-tax states like New York rank near the bottom of the list for major things like roads, bridges and airports, while states with medium and low taxes like Arizona and Nevada are near the top. Money alone, of course, is not the deciding factor in the kind of quality of life that the government can provide, and the people can see.
Migrant residents often cite the search for economic opportunity as their reason for moving. Between 2015 and 2020, about 330,000 residents who left California cited work as their reason for moving elsewhere. The state is producing its share of new jobs, but those positions are increasingly concentrated in fewer industries and geographic areas. In the recovery after the severe recession of 2008, for example, 40 percent of the economic growth came in the area around San Francisco, where high technology creates jobs. . But California, with its high taxes and burden on businesses, is increasingly losing out on investment in manufacturing jobs, the kind that provide good average wages for blue-collar workers. In 2020, for example, about 781 companies announced investments in new projects in Texas, according to Site selection newspaper, compared to 103 projects announced in California. Over the past 30 years, immigration from California has increased, even as the state’s ability to create high-paying blue-collar jobs has declined. It’s not clear how many job seekers outside of California understand the role high taxes play in the workplace, although business executives trying to compete nationally or internationally can explain it. national.
High tax advocates often argue that a progressive tax system like California’s is fairer because wealthier residents pay higher rates. Residents of states like California are increasingly embracing this idea. The latest tax increase on the wealthy comes from a ballot amendment passed in the general election. But high-tax states like California, New York and New Jersey have the highest immigration rates. These states are so “fair” that many low and middle class residents can’t wait to leave. This is a certain tax shelter.
Photo by Sundry Photography / iStock