Dan Walters

Would Proposition 55 increase California’s losses to other states?

Texas is the No. 1 destination for expatriate Californians and Austin, with its many music venues, is particularly attractive to those who relocate. Here, Carrie Fussell of the Austin band Calliope Musicals performs during Austin’s South by Southwest festival on March 17, 2016.
Texas is the No. 1 destination for expatriate Californians and Austin, with its many music venues, is particularly attractive to those who relocate. Here, Carrie Fussell of the Austin band Calliope Musicals performs during Austin’s South by Southwest festival on March 17, 2016. AP

Bakersfield attorney Steve Nichols, who came to California as an infant in 1953 – one of the millions who migrated in the post-World War II period – has given up on the state.

“I personally have bought a home out of state for retirement,” Nichols volunteered in an email this week. “I am a high-income taxpayer but don’t want all my money being wasted in the future on irresponsible projects and retirement benefits for public servants.”

“That same decision is being made by hundreds of thousands of people in the state,” Nichols continued, “but our elected officials don’t see the writing on the wall.”

Nichols has company. California has been a net loser in state-to-state migration for two-plus decades, particularly during severe recessions, such as the aerospace meltdown in the early 1990s that saw more than a million Californians leave.

Between 2007 and 2014, California lost 625,000 in net domestic migration, but despite that loss and a net decline in foreign immigration to near zero, its population continued to grow, primarily due to its having more than twice as many births as deaths.

As The New York Times put it in an analysis: “California has long been the destination of American dreamers from other states. It no longer plays that role; residents are leaving for greener pastures out East.”

“In 1960, half of California residents were born in another U.S. state,” the article noted. “Today, that’s down to 18 percent.”

For the most part, Californians who leave – Texas being their most popular destination – are low- to middle-income workers who lack higher educations and want better jobs and lower housing costs.

Domestic migrants to California, meanwhile, tend to be young and well-educated, seeking their fortunes in technology or other cutting-edge fields, thus blunting the economic impact of outflow – and perhaps even creating a net economic gain.

But could we see a new exodus by those with high educations and incomes, like Nichols?

Astronomical costs in the San Francisco Bay Area are putting home purchases out of reach even for families with six-figure incomes and hammering middle-income renters. Eventually, many must opt for either long commutes from less-expensive communities or fleeing to tech centers in other states, such as Austin, Texas.

And then there’s Proposition 55, which is likely to pass, extending temporary hikes in income taxes on highest-income Californians for an additional 12 years, with the high likelihood that they would become permanent thereafter.

Proponents of a ballot measure to extend what voters were told would be temporary higher taxes in California correctly state that schools will benefit from Proposition 55. But the ad’s warning of $4 billion in cuts if the measure does not pass rel

The temporary hike did not cause a noticeable outward flow, despite some anecdotal accounts. But Jerry Nickelsburg, who studies California’s economy for UCLA’s Anderson Forecast, suggests in a new report that making the nation’s highest marginal income tax rates at least semi-permanent could trigger flight.

If it does, he says, a measure meant to raise state revenue could actually cause them to drop. At the very least, he adds, “the response is likely to be some movement out of the state and fewer startups within the state, and the forecast should be tempered with that in mind.”

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