California in-migration and out-migration
Long-run U.S. population movements have been driven more by natural amenities than by jobs, and California, rich in both uniform and complementary climates, should be a persistent net gainer of domestic migrants. It has instead lost residents to other states every year since about 1990. This paper argues that its amenities are unchanged and that […] The post California in-migration and…
California's population movements have historically been influenced by natural amenities rather than employment opportunities, yet the state has experienced annual resident departures since approximately 1990. This paper contends that the state's attractions remain constant while the revenues generated by them are politically retained.
Capture of these resources can occur through either a land tax, which would burden property owners without displacing anyone, or through mobile tax bases, primarily a progressive income tax, as well as through limitations on housing supply, both of which do cause people to relocate. When the generated revenue is used for redistribution, high earners pay considerably more than the value of services they receive, prompting them to leave due to higher pre-tax wages firms need to pay.
Proposition 13 concentrates these gains onto mobile tax bases, securing long-term owners in place, leading to an understated out-migration rate. IRS data from 2022-23 reveal that California's out-migrants exceeded its in-migrants by 40 percent overall but by a significant 64 percent among households earning $200,000 or more. In contrast, low-tax states observe the opposite trend.
A straightforward comparison between states cannot account for production advantages, yet it shows no correlation between tax burdens and natural attractions, implying that competition among states with abundant amenities limits capture; California, which imposes taxes far beyond what its neighbors charge, loses a disproportionate number of residents to these states. Border comparisons and data on homeowners' tenure durations align with this hypothesis.
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