The reality is that despite out‐migration to these states, California was actually a net importer of residents from more than 17 states over the same five‐year period: Florida, Illinois, Michigan, New York, Hawaii, New Jersey, Connecticut, Alaska, Minnesota, Ohio, Mississippi, Pennsylvania, Missouri, Wisconsin, Maryland, West Virginia, and Alabama. Five of these states have either no personal income tax (Alaska and Florida) or have a flat personal tax rate (Michigan, Illinois, and Indiana)—so clearly taxes can’t be the whole story. If so, we would see a clear delineation of out‐migration to flat or no income tax states. Instead, we find that we lose people to some of these states and we also attract residents from other flat and no‐income‐tax states. So what’s going on? We know that California does have a relatively high and relatively more progressive tax rate. But the even more fundamental variable is the cost of housing. For years, Beacon Economics has argued that California is chronically undersupplied with respect to affordable housing. Our development and permitting processes, as well as our regulatory climate, have been keeping the new supply of housing muted. This limitation in turn has driven up the cost of housing disproportionately in California. Despite the fact that California represents more than 12% of the nation’s population, the state has consistently accounted for a lower share of residential permitting for almost 20 years straight. This fact has made it increasingly difficult for lower‐income Californians to maintain their quality of life in the state. In contrast, those embarking on their careers, individuals with higher levels of educational attainment, and workers in high‐wage occupations continue to find the state an attractive place to live. So who are the folks who are choosing to leave and who are moving in? If it isn’t because of taxes, then why are they moving? Again, it comes down to the cost of housing. The individuals who come to California are primarily concentrated in high‐wage occupations which enable them to better absorb the high cost of living in the state. For example, over 160,000 healthcare practitioners, architects, engineers, and computer/mathematical workers moved into California between 2007 and 2011. These are all occupations in which a larger number of workers came to California than moved out of it. Conversely, workers in occupations typically associated with lower wages were some of the most prone to move out of the state, including workers in production and food preparation/serving.
20