C A L I FO RN I A C A L I FO RN I A
The Price Isn’t Right Higher taxes are driving Californians out of the state—especially the big earners on whom the state coffers depend. Don’t believe it? Here’s the evidence.
By Joshua D. Rauh and Jillian Ludwig
H
eadlines have announced that many wealthy individuals and businesses are fleeing California. Elon Musk with Tesla and Larry Ellison with Oracle are among the highest-profile departures. According to recent data, 2020 was the first year
since 1900, when such information began to be collected, in which California’s population declined. Even so, the idea that the wealthy are leaving Califor-
nia has primarily relied on anecdotes rather than systematic evidence, and the actual costs to the state and its tax base of these departures have been unknown. In a new paper, we use data directly from California state tax filings to study how migration has varied across tax brackets over the past two decades. Reports of overall population decline are cause for concern, but for the economy, it matters whether the outflow is in fact driven by higherincome or lower-income taxpayers. While an overall population loss is Joshua D. Rauh is a senior fellow at the Hoover Institution and participates in Hoover’s Human Prosperity Project. He is also the Ormond Family Professor of Finance at Stanford University’s Graduate School of Business. Jillian Ludwig is a research analyst at the Hoover Institution. 142
H O O VER DI GEST • Summer 2022
