The California Exodus We Cannot Afford

Many businesses based in California are uprooting and moving to other states such as Texas, Nevada, and Colorado.

To name a few, companies such as Hewlett Packard (HP), Tesla, Oracle, and even Charles Schwab Corporation have recently decided to move their headquarters from California to Texas. For the first time in 20 years, the census shows more people left the Golden State than came in.

Tom Sheehy, the Founder of Sheehy Strategy Group, says employment regulations hostile toward the business community including the most recent Cal-OSHA COVID regulations, suspension of the net operating loss (NOL) tax deduction and the R&D tax credits, high cost of energy, and housing shortages have all contributed to this trend. Progressive legislators are “doing what they believe is helping the state by protecting workers with new employment regulations” but are actually sending employers and jobs away to other states.

California already has the highest personal income tax rate in the country—at 13.3%, but there are proposals to raise it to 15% or even 16%. According to Sheehy, if these proposals were enacted the top 1% of income earners, who currently pay 38% in federal taxes, would be paying as much as 54% in personal income taxes when state and federal rates are combined. This does not even include sales or property taxes.

Sheehy says the top 1% of income earners pay about 50% of all the personal income taxes that go to the state general fund. When just one of these individuals decides to leave, it is the equivalent of losing 4,000 middle-class taxpayers – to make up the lost revenues.

“If the high net-worth individuals decide to leave the state, they are taking hundreds of millions of dollars in tax revenue with them,” says Sheehy. “That means there’s a lot less money to fund public services in California.”

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