by Rex Sinquefield, March 8, 2013
According to the U.S. Census’ American Community Survey, employers and high wage earners are not the only groups frustrated by California‘s wrong-minded tax policies. According to a Wall Street Journal article that recently referenced the survey, 95% of those individuals who have moved out of the Golden State earn less than $80,000 per year. The median annual income level of those who have left is around $40,000.
Without a doubt, this new revelation does not support the commonly held belief that California’s punitive tax policies are only impacting successful entrepreneurs and high-income workers. In reality, the state imposes a minimum income tax rate of 9.3% on all workers earning more than $48,000 per year, an income level that is well below the state’s media income level of $60,000.
Combine this draconian individual tax policy with the state’s high cost of living, the fact that it has the highest unemployment rate in the country, out-of-reach housing prices, and to top it off, gas prices that are 50 to 60 cents higher than the rest of the country. Clearly, Sacramento‘s tax policies — which were developed to help disadvantaged individuals, lower-income families, and underemployed workers — are doing much more harm than good.
And workers are responding. They are fleeing California’s punishing tax regime in droves in favor of nearby states that seem to be rolling out a veritable red carpet. Low tax states are accepting California’s outflow with open arms, and offering them a plethora of employment opportunities.Indeed, a number of western and southwestern states (such as Washington, Nevada, Arizona, and Texas) are actively pursuing employers of all shapes and sizes and workers of all kinds through more favorable tax structures.
Eager to employ California’s overtaxed refugees, an alarming number of large company relocations have been announced in the last few months. The list includes: Campbell’s Soup, Chevron, Comcast,eBay, LegalZoom, PayPal, Yelp and Maxwell Technologies. These corporate moves to states with more favorable business climates are resulting in the loss of thousands of jobs and employment opportunities. The economic blow to California surely will have a detrimental impact on local communities and the taxpayers who stay behind for years to come.
In addition, according to a FoxNews.com report, California entrepreneurs who are guding growintg companies are increasingly looking to relocate. This group includes such innovators as Peter Farrell of ResMed, a medical-device maker that employs 600 workers. According to Farrell, “California is unfriendly. It’s become an unfriendly business environment.”
Referenced in the same report are several other stories of small businesses whose owners have decided to leave California for a more supportive business environment, such as a southern California manufacturer, Fallbrook Technologies, which recently announced that the company is moving to Texas, the land of no income tax. One Lake Tahoe-based accountant said he’s received more than 100 inquiries from Californians about the possible tax advantages of relocating to a state with lower taxes.
Ultimately, California residents may not be experiencing the same renewed confidence that is being felt by other Americans as the Dow reached record highs this week. Their frustration may be compounded by the fact that the enlightened leaders of pro-growth states are happy to entice their state’s best workers and employers with greater opportunities. And all of this begs the question: When will California’s leaders decide that the losses of economic and human capital are too great to withstand, and possibly to survive? Clearly, the people are not waiting for that moment of clarity.