March 6, 2006 8 Comments
Meathead Economics, from the Wall Street Journal.
It takes hard work to drive anyone away from California’s sunshine and scenic vistas, but politicians in Sacramento have been up to the task.
The latest Census Bureau data indicate that, in 2005, 239,416 more native-born Americans left the state than moved in. California is also on pace to lose domestic population (not counting immigrants) this year. The outmigration is such that the cost to rent a U-Haul trailer to move from Los Angeles to Boise, Idaho, is $2,090–or some eight times more than the cost of moving in the opposite direction.
This isn’t [Rob Renier’s] first foray into confiscatory tax politics. Last year he sponsored a ballot initiative narrowly approved by voters that imposed a percentage-point income-tax surcharge (to the current 10.3%) to pay for government mental-health subsidies. And in the late 1990s he helped to pass an initiative to raise the state’s tobacco tax by 50 cents a pack to pay for children’s health care.
All of this has contributed to the trend of wealthy taxpayers disappearing from the state. State finance office data indicate that the number of Californians reporting million-dollar incomes fell to 25,000 in 2003 from 44,000 in 2000. That decline has cost the state $9 billion a year in uncollected tax revenues.
California’s generous social programs depend on a strong population, a rich population, and a strong property tax base. A relatively small downturn in population and housing demand could cause a large correction in real estate prices.
When things were good, California was tempted into creating big social programs. Now that the economy is cooling down, they could wind up in the same boat as GM and Delphi – past their earnings peak and paying obilgations made during the good years.
LATER: Tam warns other states to be on the lookout for the type of California refuge who flees the state and then tries to Californize their new home: “Some folks may be leaving California looking for freedom, but [some] guys are just leaving to find more comfortable chains that don’t make them look fat.”