Andrew Parker

Why Wealthy Californians Are Seeking Tax Relief Beyond State Borders

California was the dream destination for many people, but it’s not holding onto its residents like it used to. In the past three years alone, over 750,00 people have packed up and moved out. These aren’t just ordinary people either, as the majority of them are quite wealthy. What’s going on? Let’s take a look at the situation and some of the reasons why so many Californians are saying goodbye to the Golden State.

The Great Departure

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The majority of people leaving California are educated and well-off individuals who are taking their wealth with them. This is causing major issues for the state because the government uses its tax dollars to keep things running smoothly. Without this income, officials can’t pay for things like schools, roads, or hospitals.

Taxed Out

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One of the major reasons people are leaving the state is because of the high taxes, as income taxes alone can range between 1% and 12.3% of people’s paychecks. And when you go to the store, the state sales tax rate is 7.25%. Why stick around when you can keep more of your money in states like Texas or Nevada?

The SALT Cap

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In 2017, new regulations on state and local tax deductions came into play, which hit many Californians pretty hard. Being able to deduct only up to $10,000 meant that lots of residents had less tax relief than previously and were forced to think about whether they could continue living in the state. Many of them are thinking about greener financial pastures elsewhere.

Cash Crunch in California

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As so many people and companies are leaving the state, there’s not as much money going around. This is causing huge problems for the state’s budget because they can’t afford to pay for essential services anymore. It may become a vicious cycle, as less money means fewer jobs, so people have to find employment elsewhere.

Poor Job Market 

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Speaking of jobs, it’s already become pretty difficult to find a good job that pays well in the state. This makes it harder for average families to save for the future or just enjoy their lives without constantly worrying about money. Even people with great skills are struggling with so much competition and so few opportunities.

Worries in the Workforce

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As these people leave the state, California may start suffering from a lack of skilled workers. This could slow down growth and stop businesses from achieving their goals. A smaller workforce affects all kinds of industries, especially those that need a constant supply of fresh talent and ideas.

A Revolution in Remote Work

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With remote work becoming more popular, many Californians, especially those in tech and professional services, are questioning if they need to stay in the state. After all, they can move to other places and receive the same salary but with more bang for their buck. They’re not tied down to California’s high costs anymore.

Budgeting Problems

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The state also needs to find around $68 billion just to balance its budget, and with so many businesses and people leaving, this could be seriously difficult. If things don’t turn around soon, the state might have to cut back on things like road repairs and public services. It’s likely that community services will take a serious hit.

High Cost of Living

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The cost of everyday things is also going up, meaning that essentials like food and clothing now cost an arm and a leg. For richer people, this isn’t a huge problem, but many lower-income and middle-class families are struggling to make ends meet. They’re unable to stay in the state and still have a good quality of life.

Hard to Own a Home

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Even buying a home has become a distant dream for many Californians because the state has some of the highest home prices in the country. According to Zillow, the average home costs around $783,666, which is 6% higher than in 2023. These prices are going home while wages remain relatively the same, so potential homeowners are looking elsewhere instead.

The Effect on Real Estate

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With fewer people wanting to buy homes, the real estate market in California could take a serious hit. This affects everyone, as whether you own a home or rent, prices will likely change for the worse. A weak real estate market could mean lower home values, and that’s pretty bad news for anyone looking to sell.

Not So Safe

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To make matters worse, California is facing a number of different safety issues, too. Crime rates are rising, while natural disasters like wildfires and earthquakes are becoming more frequent. It’s becoming a lot harder for people to call the Golden State their home, as these safety issues can be pretty expensive, too.

New Location

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Some of the most popular places for Californians to move to are Texas and Florida, mostly because neither one has a state income tax. Many rich people want to keep more of their paychecks in their pockets. Of course, these other states make up this income tax shortfall through other taxes, like sales and property taxes.

The Reasoning for Retirees

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Both Texas and Florida are appealing to retirees in particular because of the lower living costs and better tax policies. As they’re on a fixed income, they want to live in a place where they can truly stretch their retirement savings further. Moving to these states is a smart move for those people looking to spend their golden years in comfort.

Businesses Going Bust

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Many local businesses are feeling the pinch, too. Fewer customers mean they’ve got to rethink what they’re selling or even if they can stay open. They’ll have to adapt to these changes and move away from being so dependent on local people. If they don’t, then they might have to close down for good.

More College Graduates

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In 2022, the state had a net gain of young college graduates, although this population of people has fluctuated over the years. The Golden State may still have some appeal for the up-and-coming workforce. They may believe there are opportunities here that they can’t get elsewhere.

Traffic Troubles

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One of the less talked about but equally stressful parts of living in California is the traffic. Cities like Los Angeles have become infamous for their awful congestion, which quickly turns an easy drive into a long and painful journey. The idea of being stuck for hours in traffic isn’t exactly nice, which is why some people are looking elsewhere.

Political and Social Problems

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California is also one of the most politically left-leaning states in the country, although this isn’t the case for everyone. Research shows that wealthier people tend to be more right-leaning, so it’s no surprise they’re moving elsewhere. From both a financial and political point of view, states like Florida and Texas fit their worldview a little more.

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