Column: California’s population is on the decline, and high-income earners have joined the exodus

SACRAMENTO —  It turns out high-income people are also fleeing the state — a new twist in the California exit.

That should worry ruling liberal Democrats who love to tax wealthy people and spend their money, especially on social programs.

Some golden geese are taking flight.

For years, once-burgeoning California has been hemorrhaging population. This has been happening on several fronts.

More people are leaving for other states than are moving here.

The inward flow of foreign immigrants has slowed substantially.

Fewer babies are being born. More people are dying.

It’s the flow of Californians to other states that’s so unusual. Throughout the 20^th century, people from the Midwest and South — from all over America — flocked here for jobs, opportunities, sunshine and a better life.

My dad left his family’s depressed Tennessee farm in the 1920s to work in the Southern California oil fields. My quarter-Cherokee mom vacated Oklahoma at the same time because she thought her home state was bigoted and California was more tolerant and enlightened. Neither ever regretted it.

Millions of Californians have similar stories.

But many descendants of last century’s arrivals now see better opportunities for the good life in other states. California is too expensive, and their earnings can buy more elsewhere.

That said, our big cities are still jampacked. And we’ve got more people than our available water and electrical grids can often handle, contributing to the departures.

California is still by far the most populous state, with an estimated 39 million people last year, according to the U.S. Census Bureau. But Texas was gaining with 30 million.

Entering the 21^st century, when California’s population was about 34 million, we were predicted to reach 45 million by 2020 and 59 million by 2040. So much for that. We hit a peak of 39.6 million in 2019 and have been losing population ever since.

Until now, we’ve been in denial, telling ourselves that college-educated, upper-income people weren’t leaving. Our progressive tax base and growing economy were secure. The departees were lower-to-middle-income people who weren’t the heavy taxpayers or big job producers.

Everyone seemed to buy into that, although many could cite anecdotal evidence to the contrary.

I plead guilty. This is what I wrote two years ago:

“More affluent people have been moving here than departing. They can afford our escalating costs of living. Political spin about wealthy people abandoning California is fake news.”

That was what the think tanks were saying. Now one has dug into the latest data and discovered that people of all economic classes are leaving, including the wealthy.

“Most striking, California is now losing higher-income households as well as middle-and-lower-income households,” the independent Public Policy Institute of California reported Tuesday.

The outward migration “has the power to reshape the state,” the PPIC asserted, adding that “the state is no longer a significant draw for people from other states of any age, education or income.”

“California still has an incredible economy — a powerhouse globally,” says PPIC demographer Eric McGhee. “There are a lot of positives here, but a shrinking population is a sign that something’s not working for people. They feel they can’t put together a good life here.”

That’s partly because, for many people, housing is either unaffordable or not worth the cost when compared with cheaper homes in other states.

The median price of a single-family home in California was $735,480 last month, according to the California Assn. of Realtors. That’s out of many people’s reach even though it was nearly 5% lower than the previous February. Since then, mortgage interest rates have risen dramatically.

We all know one reason for high housing costs: Demand exceeds supply. We’re building only one-third of the houses that we did 60 years ago, when the population was less than half of what it is today, said Dan Dunmoyer, president of the California Building Industry Assn.

Another reason for the steep costs and slow building is a regulatory quagmire, including lawsuits — some frivolous — aimed at blocking housing developments.

Dunmoyer says that two Texas regions — Houston and the Dallas-Fort Worth area — built more housing last year than all of California. In 2022, an estimated 128,000 home-building permits were issued in California, about half what there were in 2005.

The net loss of high-income people is relatively small, McGhee says. But the number leaving California “increased dramatically” to 220,000 in 2021, he reports.

It wouldn’t take many fleeing rich people to hurt the state treasury. The top 1% of earners pay nearly 50% of the state income taxes. The top 10% kick in roughly 80%.

“Taxes definitely are part of the story” why high-income people are leaving, McGhee says. “Taxes is the last straw that pushes them over the edge.”

California imposes by far the highest state income tax rate in the country: 13.3%. Texas is the preferred destination for California departees, according to the Census Bureau. The Lone Star State has no income tax. Neither does Nevada, another favorite. Or Washington and Florida, other attractive states for Californians. The No. 2 destination is Arizona.

Many college-educated, high-income people are moving out of state because they can now work at home anywhere in the country for a well-paying California company, McGhee says.

We’ll see how long that lasts once California companies realize their employees’ living costs have fallen and they no longer need to pay so much. Odds are the workers still won’t move back to California.