California Is Chasing Wealth That Has Feet
California's high taxes, costly regulations, and housing crisis are driving wealthy individuals and businesses to relocate to lower-cost states like Texas and Florida, eroding the state's tax base and economic vitality. The out-migration of capital and talent threatens California's long-term prosperity as it pursues policies that push away the very wealth it relies on.
Background
- The article discusses California's severe budget deficit (projected at tens of billions of dollars) and argues that the state's progressive tax structure — which relies heavily on high-income earners and capital gains — makes it uniquely vulnerable to economic downturns and out-migration.
- "Wealth that has feet" refers to wealthy individuals and corporations who can easily relocate to lower-tax states (Texas, Florida, Nevada), taking their tax revenue with them and leaving California with a volatile, shrinking tax base.
- Key context: California has the highest top marginal income tax rate (13.3%) and one of the most progressive tax systems in the US. In recent years, tech IPOs, remote work, and pandemic-era policies accelerated departures of high earners.
- The author argues that chasing high earners for revenue creates a boom-bust cycle: when the economy is good, tax revenue booms; when it turns (or when people leave), the state faces massive shortfalls that impact services for lower-income residents.
- This is part of a broader debate about "tax flight" and whether progressive taxation is sustainable when capital and talent are increasingly mobile.