> In the tax filing years 2020 and 2021, the average gross income of taxpayers who had moved from California to another state was about $137,000
Let's assume it's $150k for 2023 (high)
> What’s different is that in each of the prior two years, more than 250,000 Californians with at least a bachelor’s degree moved out, while an average of 175,000 college graduates from other states settled in California
That's 75k net loss, assuming 100% employment (high)
> In California, the top tax rate for personal income is 12.3%.
Assuming all loss income was at the highest bracket (high), the total loss in tax revenue: 75k * $150k * 0.123 = $1.38B
Realistically, the number could be lower because the calculation above is conservative.
> State budget analysts recently projected a record $68-billion deficit in the next fiscal year because of a 25% drop in personal income tax collection in 2023.
That's $1.38B vs $68B
I think we all agree that California has lost population, but I feel like the article is manipulating statistics to drive a misleading narrative. The deficit is real and needs addressing. It's more likely due to income dropping (lower salary due to lay off, lower realized capital gains, lower passive income, etc), rather than the "wealthiest" are leaving the state.
Your numbers are way off - that’s only for the initial income tax. You also need to account for the sales tax (impacting cities and counties) and then the circulation of that wealth and the tax on that as well.
Ultimately, all money in circulation eventually goes into taxes. Put another way, if I trade something and receive $100 and 10% of that must be sent to the gov. I now have $90. I take that $90 and buy something, that person now has to pay $9 to gov and they have $81.. and so on.
Hopefully, people also use that money to generate new goods and thus generate more capital inflows to the state. When that happens, the state gains more wealth via taxes.
That loss is likely closer to $11.25B ($150k * 75k) than $1.38B. (Note I’m not using exact numbers, just pointing out the $11.25B upper bound)
That said, I do think the article is conflating. In reality: job loss, migration out of the state and generally sluggish economy is going to lead to the deficit, not just the migration.
"All money in circulation eventually goes into taxes" is interesting perspective, but I don't know if it makes sense on a state level. For a high earner, what percentage of their spending stays in California? I'd guess it's not very high. I tried searching, but didn't find any reasonable estimate.
This leads to the parallel question, how does this work on a national level? What percentage of American earnings stay in America, and thus eventually go to federal taxes? Probably a higher percentage, but still less than unity. But if we assume it all does, this leads to an apparent paradox: if all the money eventually goes to state taxes, how can all of it also go to federal taxes?
I'm not sure this is a helpful way to view what actually happens. What am I missing?
Good points! You probably realize this, but in case others don't, assuming a 12.3% tax rate may overstate things even more than just being "conservative". Only the portion of income greater than ~$700K is charged at this rate, with everything less than that being charged at lower marginal rates: https://www.nerdwallet.com/article/taxes/california-state-ta.... Someone who earns less than $350K (and the first $350K for everyone) is at a maximum marginal rate of 9.3%. This makes your conclusion even stronger---the article seems misleading.
Ya, someone single making $150k/year is paying an effective state income tax rate of 7% (and an effective federal income tax rate of 17.82%). But I get the very conservative simplifications parent was making to make their point.
What worries me is California refuses to raise property taxes. That and strip local government of any and all say in where and how to build homes and buildings. I think that's what is a necessary part of any solution. Raise property taxes because without it, your income tax will have no upper bound.
Prop 13 means that any property tax increase won't apply to anyone who's owned a home for a long period of time, or purchased at the bottom of the market in 2008. It's only going to apply to homes recently purchased, and would mostly dissuade people from moving into the state.
> Prop 13 means that any property tax increase won't apply to anyone who's owned a home for a long period of time,
No, it doesn't. Assuming that a taxing jurisdiction in California was to raise property tax rates, Prop 13 would apply the rate increase to all taxpayers in the jurisdiction. The lower effective tax rate for people who have owned a property longer under Prop. 13 isn't a limitation in their nominal rate, it is a limitation in their basis value (assessment increases are generally limited to the lower of 2% or the rate of inflation each year.)
But that's all theoretical, in reality, Prop 13 means there won't be any increases to property tax at all, barring repeal or amendment of Prop 13 itself.
While everyone talks about the limitation on tax basis value assessment increases in Prop 13, Prop 13 also sets a very low maximum property tax rate of 1%, and every taxing jurisdiction in the state already has their rate set at this rate, so it is impossible under Prop 13 to raise property taxes rates.
Yes it's quite worrisome indeed. highest state tax, most mismanaged budget, welfare black hole, high living expenses aren't enough to remind an average californian how futile their existence is. More property taxes will build some character.
States already set limits on what zoning decisions local municipalities can make. The towns only derive their power from whatever state laws delegates to them. If the state really wanted to they could strip this power and run all regulation itself (similar as how local towns only have limited flexibility in terms of setting education or police policy).
California has passed some laws recently which already take a step in this direction. SB9, for instance, made it so that on some parcels of land local municipalities were not allowed to block existing property owners from building a duplex.
Those people who are "forced" to leave will be the same people who couldn't keep up with paying the same real estate tax as their neighbors, but still enjoying the same prime location and municipal service.
At which point, one of the two things will happen:
(1) Housing price will fall down because there are more on the market.
(2) Or, the houses will be snatched up by people who can pay the price, many of which are young couples working in high-paying industry willing to start a family. It will cause net population increase. Or, even better, they can be replaced by dense residential blocks.
Either way, it sounds like desirable outcome to me.
What's unfair is being forced to move from your home of 20 years, far away from your community, just because some tech companies decided to set up shop in your city.
No we want people sitting on extremely valuable, underutilized land to leave. They’re already paying very low taxes. It will make room for people to come in and pay income tax and more efficiently utilize the land.
Actually neither. I’m an American who cares about our country prospering long into the future and California is a huge, huge component to that whether you like it or not.
One of our most technologically innovative and naturally productive regions putting itself in a tax policy chokehold is Strictly Bad. Certainly so for the majority of Americans, at the very least.
False condition. California has plenty of water, as evidenced by its wasteful farming practices, which consumes 80% of it [1]. As with most of its problems, California’s retail water “shortage” is a policy choice.
Significant part of the agricultural water comes from the central valley aquifer system which is being pumped much faster than it is replenished. Adding more population in permanent settlements won't help mitigate the problem.
California doesn’t have a water issue, it has at worst a water allocation issue. However, even with dumb policy desalination has become cheap enough to be practical for costal communities. Paying ~1$ for 200 gallons just isn’t an issue at the household or retail level just agricultural and industrial uses.
Right, that is why there are people in the central valley living of water from trucks. And the ones that do have water need to dig deeper and deeper to find it.
"Don't look up" is a film that could be perfectly be based on the California groundwater crisis.
Right. And if they stopped doing that, the water level would not be replenished. Groundwater aquifers are not a renewable water source, and when you extract the water from underground you can compact the soil causing it to sink and lose its ability to store water, which is also happening over there according to the USGS.
> if they stopped doing that, the water level would not be replenished
How is that relevant? The point is they wasted water. They’re not victims, they’re the source of the problem. People moving into California’s cities are a rounding error to its farms’ wasted water.
Recharge rate isn’t consistent across different areas. It can be quite high if a river happens to be nearby, you’re next to a large park with zero use, etc.
It takes about 50 years for the groundwater in the aquifer system to replenish if I remember correctly, if it is not being pumped. Today it is being pumped faster than it replenishes with no signs of it slowing down.
The people who want to "utilize the land" already live here... in shoe-box apartments... with roommates... in their forties. Most of them are literally just the children of the people living on that under-taxed land. Who may finally get the tax benefit sometime in their 60s that their parents got in their late 20s.
Isn't it the opposite? The parent wants the people who don't want to pay their fair share of taxes to leave?
Every time a person cashes out their home that they bought for a couple buttons and some twine in 1982, then moves to Arizona to retire, California's tax revenue goes up, because the people that take their place actually pay appropriate property taxes on the 2023 value of the home.
People of retirement age do leave; but probably not fast enough if you’re trying to “raise” taxes that way.
That said, it depends on people’s total state tax burden. If it’s too high they will leave to lower tax burden states.
This is one of those slow moving things like when corps were leaving NYC in the 80s. It’s hard to stop it. Adding taxes is too attractive. Eventually companies and people will have enough reason to leave.
Many are not there yet. You will never have everyone willing or able to leave. But on occasion you get enough leaving so that a state is left with a potential which will not become realized.
I'm in NJ so not sure if this applies but since I'm in another high tax state I thought this would be relevant. One thing that I find interesting that isn't really talked about is the difference in property tax rates between different towns. In NJ for example, my parent's home is worth $300k-400k and they pay almost $10k in property taxes per year. Meanwhile, an out of state investor could buy a $3 million property in NJ's Long Beach Island and pay just $30k in property taxes on it (1/3 the rate my parents pay).
I don't know how much this applies to California, I think they cap property tax increases there, not sure how the rates differ by town?
A single state-wide standardized marginal property tax rate would probably work best. Those with $5 million+ single family homes should be paying a higher percentage to discourage that type of housing. Additionally that tax money could be collected at a state level and distributed more equitably (to towns that aren't as wealthy).
Ultimately single family homes need to be phased out in these kinds of places and replaced with higher density along with mixed zoning. Mixed zoning should reduce the need for more car based infrastructure which is extremely expensive and allow more efficient public transit to be built. That would lower costs for regular people since they wouldn't need a car to get places.
California has prop 13, meaning your property tax increases are capped, but if property changes hands, the property tax resets to a more reasonable (and much higher rate). Which makes the property market even more illiquid in California.
Well this is definitely a take I don't read often on HN. The notion of having to pay "rent" on property you "own" is just weird, and it's not helped by the fact that very notion property of ownership is eroding across the nation. What's your logic behind property taxes being inherently better than income taxes?
There's the obvious aspect of you having to pay for the associated infrastructure that makes it possible for you to live in the property you own. Streets, fire department, police, electrical grid, water/sewer. Those costs aren't related to the purchase price of the house/property you own.
That wasn't my question. I wasn't asking "why are property taxes necessary". I was asking: how is that inherently better than taxing income?
As to to the question you answered, I could understand land value taxes, or some other forms of taxes that are actually based on the infrastructure cost for supporting your home. (And you could add exemptions/tiers for people who can't afford it, that's beside my point.) But property taxes seem nonsensical for exactly the reason you mention: that they depend on the value of the home (at whatever point) rather than on the cost of the infrastructure itself. Whether my home sells for $1 or $1M, my pipes and wires are going to act the same. And neither of those tells you anything about my means for payment - I could easily lose more money on a more expensive home.
Then tax based on ZIP codes instead of property sale value? But again: why not just try to do something that's more computed from the public expenditures for that location rather than based on the location itself?
I think we are saying the same thing. I am not calling for California to end its state income tax either. I am suggesting that prop 13 was a disaster.
Hot take: One possible compromise is limit prop 13 to a single property maybe two bed two baths for the owner and each adult state resident also gets this "credit"?
I mean what the owner and every adult living in the household can help keep the property tax low but only for their own primary residence.
but beyond that raise the property tax every year based on property value.
I don't think we're saying the same thing, but rather speaking past each other. I think I need to dissect these two parts of your original comment:
> What worries me is California refuses to raise property taxes
Sure, if you're trying to increase taxes somehow, then the proposal in your reply could be one way to do it, and it sounds less painful than increasing everybody's property taxes. That logic isn't what I have issues with, since you're just comparing different ways to do property taxes regarding primary residences. (This isn't to say I agree or disagree with it.)
> Raise property taxes because without it, your income tax will have no upper bound.
This is the part I took issue with. It appeared you were trying to motivate property tax increases by arguing income taxes are an obviously worse way to make up for them, but... why? I didn't understand the logic behind that, and that's what I was asking about. If I'm a policymaker trying to choose between increasing income and property taxes, why should I choose property taxes to be the one to increase?
I think we are pretty aligned on this topic.
My ulterior motive for pushing for high property taxes is to satisfy a mental curiosity I have -- will raising property taxes to sky high rates (my ideal cap is about seven to eight percent of the sticker price of the land) lower the sticker price of the land/property?
I just want to know what happens if you have to pay the sticker price of a piece of land (compounded) every ten years or so.
But that's not relevant to why a policy maker should choose to raise property tax over income tax.
You could argue both ways here - income taxes are straightforward because you can basically get your cut at the source of income but property taxes are good because you can't hide or take land with you to another state.
And in general, I am not an expert on this or any matter but California is very lopsided with prop 13.
I don't even live in California.
Not californian, but my interest was piqued by this “idea”. So what you are saying is - if my property values double - so do my taxes? Is the goal here to force me out of my home?
> Not californian, but my interest was piqued by this “idea”. So what you are saying is - if my property values double - so do my taxes? Is the goal here to force me out of my home?
In the comment you just replied to, weren't they specifically saying this wouldn't apply to your primary residence?
Isn't that avoidable by making exceptions for primary residences? That would disincentivize ownership of multiple properties and associated rent seeking, but it wouldn't price out residents who actually live there.
Sure, there are lots of policies that could help with that problem. I'm just confused what logic leads to the conclusion that income taxes are inherently worse than property taxes.
The land should belong to society at large not any individual. Land is not created so it doesn’t make sense to allocate its rents to an individual. The rents should be split by everyone through land value tax.
The SALT deduction used to serve as a kinda-sorta cost-of-living adjustment for the federal tax code. Tax brackets don't consider cost of living, so taxing someone earning $200k in CA the same as someone earning $200k in, I dunno, Nebraska, isn't exactly fair. But since higher-CoL areas tend to have higher taxes, the CA earner at least got to deduct the enormous state taxes they paid from their federal return.
The TCJA capped the SALT deduction at $10k for married filers, which is an absolute joke to anyone who pays taxes in CA or NY. But that cap goes away in (I think) the 2025 tax year. I don't think CA has to do anything but wait out the clock and make damn sure that its representatives stonewall any legislation to extend the SALT cap.
And yes, I know that econonmists absolutely love the SALT cap because it's a tax on non-poor people. But the point of the tax code is not to extract every last penny from non-poor people -- it's to make sure everyone is contributing fairly to a well-run society at all levels. If you want states to be the laboratory of democracy, that's fine, but you can't do that by penalizing states that have high taxes in order to pay for services that the federal government doesn't provide. And that's precisely what the SALT cap does (and was explicitly intended to do).
Something I picked up in era of machine learning is why humans are so terrible at making long term decisions - if artificial neural nets model how our minds work even a little bit it is a miracle that humans are capable of symbolic logic and long-term decision making outside of ritual.
That makes this sort of thing annoying. The odds of arriving at "why did this happen?" through rational discourse are very slim. However, I do recall a number of years ago people making arguments like "lol what are they going to do, leave?" and it appears that was wrong. And I would encourage people who are gung-ho about US debt overall to reassess their beliefs in light of that - it doesn't look like the money was invested productively to me and it is a dangerous assumption that there will be wealthy people around to pay off someone else's stupid spending.
But the real problem here is not that the current policies don't create enough wealth. That is a problem, but the real problem would have been a decade or more ago. It is like when the local dam runs out - risky decisions and bad principles would have taken root decades ago that were, in hindsight, risky and reckless.
The governemnt isn't run by meritocracy, it's run by politicians looking to maximize their power and wealth. They could be perfectly logical and learn to compromise amongst all but the most extreme outliers of the various parties, however, that's not the case. It basically becomes all or nothing for them (and their party) and the government limps along behind that. It's nothing like machine learning unless you were to put those as goals of the algorithm.
So, speaking as a former Californian (albeit briefly, 1989-1992) and current Texan (over 20 years), I think that, while there are many substantive and important policy differences between the two states, none of them are the core reason why people leave California to come to Texas (or other states).
The core reason is that, even compared to places like Florida and Texas that have seen property prices go up a lot lately, California's urban areas are hideously expensive. The only way that I know of to fix this, is for a bunch of people to leave those high-density, urban areas. They could move to inland California, but if they're leaving the city they're in, they often decide to go to another (less expensive) city, in another state. This is the most direct solution to the problem of property being too expensive in California.
Not saying that California has perfect policies or anything, but their biggest problem is the runup in property prices caused by past successes.
I admit it is odd at first glance, but I can think of a few possible explanations:
1) they cannot actually afford it, and will find this out in a few years
2) they are being bought as investments by REIT's and such, not by real people
3) they are being bought by foreign money as a way of parking wealth in the US, because it is perceived as a safer place to have your money than the home country
There could be other explanations, as well, but these are three that come to mind.
If 5 people can afford the real estate and 15 people cannot, it isn't that weird that 5 people are staying and 15 are leaving. That the price equilibrium is reached means that a lot of people can't afford those prices, which will result in a net loss of population until a population equilibrium is reached. And it isn't weird for very expensive but smaller places like Aspen to have already reached both of those equilibriums, so their population is relatively stable but they are still very expensive places to live.
20 people arrived in town, 5 found housing that they could sustain, 15 did not. Unfortunately, since residents who are renting bid for the same housing as newcomers, they can get pushed out as well (5 residents with housing, 15 new comers, not all the stayers will be existing residents).
> Tax filers in the top 1% of income, earning around $1 million and above, have typically accounted for 40% to 45% of the state’s total personal income tax revenue
One problem with very progressive taxation is you become dependent on relatively few people, possibly with their own income sources undiversified. If these people move, the stock market has a flat year, or the tech sector gets hit, that's a lot of money, even if 95% people in the state are still doing ok.
>> It’s probably going to be some combination of cutting back spending and raising taxes
The article almost acknowledges this, but if taxes really are chasing away people, even more taxes gets you into a death spiral.
> The article almost acknowledges this, but if taxes really are chasing away people, even more taxes gets you into a death spiral.
Maybe for a city like Detroit but California has something that most people, including most rich people, really want: great weather and lots of accessible nature. The other problems are solvable but geography is destiny.
This is the first article that has enough concrete data to make me worried but we've been through this before and the state is in a much better place than it was 20 years ago with Davis and Schwarzenegger.
All of this has happened before and all of this will happen again.
>One problem with very progressive taxation is you become dependent on relatively few people, possibly with their own income sources undiversified. If these people move, the stock market has a flat year, or the tech sector gets hit, that's a lot of money, even if 95% people in the state are still doing ok.
Such as what happened to New Jersey when one person, David Tepper, moved to Florida.
> With investors and high-income taxpayers receiving substantial compensation in the form of stocks, last year’s sluggish stock market accounted for a major share of the decline in state income tax revenues.
There might be something to the article, but that's a year out of date. The Nasdaq was up 43% in 2023. It makes me wonder how much of the article might have already played out.
It's not a surprising trend, there's been a steady build up of tax reasons that have made California a worse deal:
- removing the SALT deduction hurts Californians (and NY most) with their high taxes and high wages
- Capping the mortgage deduction to $750k only matters in places where houses are over $1MM (like California)
- Because even federal taxes are progressive, if you can work remote make half as much money in a place that costs half as much, you'll take home proportionally more
This reads like a disjointed opinion piece but it does link to one piece of research on the topic by Joel Kotkin that looks a bit more grounded in data:
A casual search shows that Tennessee receives USD 1.46 for every USD 1 it sends to the federal government.
The rest of us seemingly pay for Tennessee's refusal to increase personal income and peoperty taxes.
All infrastructure requires maintenance and the statistics I get hung up on is that it costs over a million dollars to pave one lane mile of road. This is something we need to pay every thirty years. Think about how much road we have in the US or in your case just Tennessee. Do you think Tennessee can pay for all public roads (other than the interstate) with state and local money? How do you avoid taxes from going up while also avoiding infrastructure from crumbling?
There’s a lot to unpack there, but TN has no income tax, a moderate sales tax and low property taxes.
That said, they don’t offer much (which is fine). Infrastructure is not really expensive compared to social programs. Maintaining infrastructure is often way cheaper than building new infrastructure. Where as maintaining social programs are massive year-over-year.
lol those states aren’t subsidizing, the federal government is. The distinction is important because they literally print the money and distribute it.
That said, often those funds are allocated based on defense contracts, military bases present, assistance for the poor, education grants, etc. for instance, the federal government grants funds for roads based on drinking age (among other things).
Even if that was your argument, California is granted more than it pays in.
> This is accounting. The production of one provides for the other.
Again, that’s not how the system actually works. The federal government quite literally prints the money. No work was done, no taxes collected, funds are just handed over. Later taxes are collected and the “accounting” is “done” (ie bonds issued for the deficits)
The US government is currently running a >$1T deficit per year (more than all states receive combined btw).
> This is part of the story. Without those other states wealth redustribution, Tennessee would have to tax more or provide less.
It’s not part of the story really.
All states effectively receive 30-50% (with TN right in the middle at 40%) of their state budget from the federal government. It’s kind of a moot point because they receive those funds often for unrelated things (such as military bases).
Every state simply wouldn’t provide services that aren’t being funded. I really don’t see the argument, particularly as many of the reasons states receive these funds are because the federal government provides them (many are healthcare services, distributed based on population). New York may reject some funds based on the desire not to issue some program, for instance.
I think the fact it’s assumed California pays more into the system (without research) is just highlighting the lack of knowledge on the topic.
It’s not really highlighting how TN doesn’t work, when NY received a similar percentage of funds for their states budget (~40%).
I was very impressed with Nashville as a tourist, felt like a booming economy with a bright future. People seemed generally upbeat and hopeful. No doubt there are downsides (and I had a limited viewpoint) but I can see the appeal.
I find it fascinating how the US government pits every state against each other. Yes, people are leaving a high tax state to a low/no tax state. But (just using Texas as an example) what happens when Texas' growth based ponzi scheme stops growing?
Not to mention the infrastructure - The electrical grid is already creaking, and the commuting situation is already absurd in and around the major metro areas.
The US government isn't doing anything here, much less pitting anybody against anybody.
The US has a federal system. States are the primary entity, not the federal government -- it's the opposite of a centralized government such as France.
Every state just sets whatever policies it wants. They're not "pitted" against each other any more than Spain and Italy are "pitted" against each other. They're just each doing their own thing.
This is all just to say, it's not some intentional policy at the federal level. It's just how it's always been ever since the states chose to come together and form a country. The (original 13) states came first.
(BTW I'm not defending this arrangement, just describing it.)
It’s a good thing. There are too many people and too much money in California. Places should indeed compete for things and people should move more freely.
You're assuming Texas doesn't collect very many taxes, we're actually somewhere in the middle of "total tax load" for all 50 states, however the middle and lower class pay more than in other states to make up for tax laws that favor the 1% unlike in California.
So that various sets of ideas can be tried as experiments. Also, so that groups of people with different values and ideas can live in their own worlds and not have to reach consensus on everything. I believe a lot of the division in the country could be solved by returning more decisions to state and local levels. Only centralize what the constitution requires.
Mechanically, America could convert to a unitary state with a Constitutional amendment. Practically, very few want that. American states individually command resources on the scale of rich nations.
That's literally impossible given the way our Constitution and government is written. The only way would be a civil war by those who don't like the ideas of "states" and I don't think there are enough of those individuals.
> The electrical grid is already creaking, and the commuting situation is already absurd in and around the major metro areas.
…which is definitely not also the case in California.
> I find it fascinating how the US government pits every state against each other. Yes, people are leaving a high tax state to a low/no tax state.
This is a core democratic mechanism in the US: citizens leaving one state for one which they believe will better suit their beliefs, needs, aspirations, etc. — to “vote with your feet”.
This competition for citizens and business forces governments to respond to the needs of citizens — rather than mistreat them for ideological or feudalistic goals.
It's crazy how poor I feel in this state, namely northern california. Basically the state is for anyone that bought a house 20+ years ago, or multi millionaires. Everyone else is squeezed to the point they see no option but to move.
Nevada has _no_ income tax? How do they pay for anything? In Sweden, income tax accounts for 60% of the entire tax base.
Do states in the US have other revenue streams other than taxes? Because I just assume that corporate tax is also a non-starter
Several US states have no income tax, they usually make up for it with property tax (on real estate), licenses(think gaming) and sales tax. Some states that famously have no income tax have a higher tax burden on most people due to the way this works out.
Nevada at the state level specifically levies taxes on mining rights and gambling.
Nevada is mostly desert with vast strands of land people do not inhabit. They rely on mines, the US government, and being next to California for their money. Area 51 for example. The Yucca Mountain Nuclear Waste Repository as another.
California in the past banned gambling so that is how Las Vegas got started. As far as I know now you can only gamble in the state lotteries or on Native American reservations.
They are also trying to do the Delaware thing and be a place for corporations to incorporate in. Many states charge franchise fees and income taxes on corporations. Nevada charges nothing except yearly filing fees. Last I checked Microsoft chose this state for their legal headquarters.
Local jurisdictions levy taxes on property and sales.
Nevada has a (low) property tax, a (medium) sales tax, and takes in a lot of money through sin taxes on stuff like cigarettes, alcohol, and the casinos in and around Vegas.
Federal government taxes income, many states add on something as well, my state might tax 5% in a tiered fashion such that the first 20k is 0% and then 1% for 10k and so on.
Beyond that, sales tax on consumption. Property taxes on homes, vehicles, etc. gasoline tax for roads, typically both Federal and State. Nevada in particular is a hospitality state with much tourism so they’re likely getting good tax money on this.
Counties within a state and cities and towns may also add on, say a percent or two for schools or a big infrastructure project. Sometimes these are temporary measures for a fixed number of years. It’s all variable and complicated.
Washington state is one of a number of US states that doesn't have personal or corporate income taxes. To make up for it other taxes like property taxes are a lot higher.
- Washington is slightly more dependent on charges for services than the U.S. average.
- Washington depends more heavily on excise taxes, including the general sales & use tax, selective sales taxes, and the gross receipts tax (business & occupation tax) than most any other state.
- Washington is the only state with a general gross receipts tax - the Business & Occupation Tax.
Certain states with very large tourist arrivals in proportion to their population (Nevada, Colorado, Florida, Hawaii) are able to structure their taxes so that (hopefully) much of the tax burden is paid by tourists.
Sorry to shatter your illusions, but the only states whose residents have paid more taxes than they receive back in terms of federal spending from 2015 to 2021 are NY, NJ, and MA. NH, WY, ND, UT, SD, VT, and NE (+$3,907 seven-year per capita average) are also in the bottom ten in terms of being closest to breakeven. To put another way, residents of all other states—including NY ($13,566) and CA ($53,887) get more federal spending per person than they pay in federal taxes, than NE.
Ugh, I mangled some things in the above comment. Let me try again:
The only states whose residents have on average paid more taxes than they receive back in terms of federal spending from 2015 to 2021 are ~~NY~~ CT, NJ, and MA. ~~NH, WY, ND, UT, SD, VT, and NE (+$3,907~~ WA, NY, UT, CO, NH, CA, and IL (+$1,794 seven-year per capita average) are also in the bottom ten in terms of being closest to breakeven. To put another way, residents of all 40 other states get more federal spending per person than they pay in federal taxes, than IL.
Source: Rockefeller Institute's 2023 report, table ~~12A~~ 12B. <https://rockinst.org/issue-area/balance-of-payments-2023/>
California has the highest or second highest poverty rate in the country when you account for cost of living. The way California has been run is an absolute embarrassment.
This seems like the classic boom/bust cycle of capitalism and government. One upon a time, CA had things like free education through the UC and CSU system, and a tax rate that seemed similar to other states.
With the adoption of Prop 13 they eliminated much of the property tax revenue, and then ratcheted up the income and sales tax to pretty much max amounts while only collecting property tax from new(ish) home buyers. The Trump tax cuts then penalized upper-middle-class tech workers, all while continuing to reduce benefits. Utility deregulation has led to rolling blackouts during potential windstorms, and poor forest management has brought about some big fires.
Other states are also in on the zero-sum game that is bidding tax breaks to get companies to relocate.
This seems like a normal cycle of capitalism. If CA wants to change the game, they could consider options like the return of low-cost (free) schooling for CA residents, normalizing their property tax structures, or opening a single-payer healthcare system to CA residents.
Is there wide agreement it is misbehaving and ought to be changed “somehow”? Perhaps it could be modified.
There are other ways to achieve the basic objective without creating the same side effects. For example, Colorado’s TABOR has a very similar objective with a very different mechanism that slows property tax growth but does not pressure people to stay put in their current home.
> Is there wide agreement it is misbehaving and ought to be changed “somehow”?
No, voters overwhelmingly support Prop 13 in general, and feel that property taxes (which in fact are extremely low by national standards due to the Prop 13 nominal rate limit even before considering the Prop 13 assessment increase limit) are high in California. (What's actually high is property values, as a result of both Prop 13 and development policy -- and the development policy is itself, in part, due to incentives created by Prop 13 which align with those created by homeowner NIMBYism.)
It has been tweaked before, and you could maybe pass tweaks again that would enhance revenue in general, but by and large the basic structure is going to be very hard to change.
Prop 13 has been modified several times since being passed; its not impossible that it would be modified in a way which would increase overall property tax revenue, but procedurally its basically impossible for that to be relevant to the short-term funding shortfall.
I think a modification that separately tracked the prop 13 basis and a current price and charged taxes on the current price for anything that isn’t the owner’s primary residence could plausibly tax — after all, no one would get priced out of their own home as a result.
Unless Sacramento has high conviction of the law surviving court challenges, they shouldn’t reättempt it. Its mere discussion is a powerful forcing function for decampment.
No, but the Franchise Tax Board is aggressive about going into former state residents' bank accounts & cleaning them out without notice for an "estimated income tax"...even if the former resident filed in another state for the year that they moved out onward. So have your paperwork in order or get a CPA to get your money back if the FTB does a surprise withdrawal from your bank account.
The FTB will attempt to contact you by mail at your last known address about not filing for the year you moved out onward. If the FTB is unable to contact you, the funds in the bank account will be seized for the "estimated income tax"...probably a few years later. Perhaps you can give the FTB a notice that you moved out of the state before this happens?
It would be nice if the FTB contacts your bank about contacting you before the seizure, but that's not what they do. It can be particularly inconvenient if they seize all of the funds (and they will if that's what is estimated to be owed), as it may be difficult to hire a CPA in that event. Hopefully the paperwork is in order or a CPA is already hired.
I don't know what the trigger is. I know of 2 people this happened to including me. My CPA mentioned that CA was "very aggressive" & he had dealt with this before. I had already filed in a different state far away from CA for multiple years after moving out. The seizure happened on a Friday late December & my CPA got all of my funds back by the next Tuesday. Did you notify the FTB that you moved out of CA?
Edit
My friend recently had his funds seized from when he moved out for the 2016 year. He got 1/2 back but his paperwork is not in order & got cleaned out. Currently does not have enough to hire a CPA to get the rest.
I will never move back to CA. Another word of warning from a CHP officer. If you happen to drive in CA as a former resident, make sure you have your out of state license on you. If you forget your wallet, you could be cited for driving with an expired license.
Let's assume it's $150k for 2023 (high)
> What’s different is that in each of the prior two years, more than 250,000 Californians with at least a bachelor’s degree moved out, while an average of 175,000 college graduates from other states settled in California
That's 75k net loss, assuming 100% employment (high)
> In California, the top tax rate for personal income is 12.3%.
Assuming all loss income was at the highest bracket (high), the total loss in tax revenue: 75k * $150k * 0.123 = $1.38B
Realistically, the number could be lower because the calculation above is conservative.
> State budget analysts recently projected a record $68-billion deficit in the next fiscal year because of a 25% drop in personal income tax collection in 2023.
That's $1.38B vs $68B
I think we all agree that California has lost population, but I feel like the article is manipulating statistics to drive a misleading narrative. The deficit is real and needs addressing. It's more likely due to income dropping (lower salary due to lay off, lower realized capital gains, lower passive income, etc), rather than the "wealthiest" are leaving the state.