3 ms·

> In the tax filing years 2020 and 2021, the average gross income of taxpayers who had moved from California to another state was about $137,000 Let's assume i

> In the tax filing years 2020 and 2021, the average gross income of taxpayers who had moved from California to another state was about $137,000 Let's assume it's $150k for 2023 (high) > What’s different is that in each of the prior two years, more than 250,000 Californians with at least a bachelor’s degree moved out, while an average of 175,000 college graduates from other states settled in California That's 75k net loss, assuming 100% employment (high) > In California, the top tax rate for personal income is 12.3%. Assuming all loss income was at the highest bracket (high), the total loss in tax revenue: 75k * $150k * 0.123 = $1.38B Realistically, the number could be lower because the calculation above is conservative. > State budget analysts recently projected a record $68-billion deficit in the next fiscal year because of a 25% drop in personal income tax collection in 2023. That's $1.38B vs $68B I think we all agree that California has lost population, but I feel like the article is manipulating statistics to drive a misleading narrative. The deficit is real and needs addressing. It's more likely due to income dropping (lower salary due to lay off, lower realized capital gains, lower passive income, etc), rather than the "wealthiest" are leaving the state.

nkurz 3y ago
Good points! You probably realize this, but in case others don't, assuming a 12.3% tax rate may overstate things even more than just being "conservative". Only the portion of income greater than ~$700K is charged at this rate, with everything less than that being charged at lower marginal rates: https://www.nerdwallet.com/article/taxes/california-state-tax https://www.nerdwallet.com/article/taxes/california-state-ta.... Someone who earns less than $350K (and the first $350K for everyone) is at a maximum marginal rate of 9.3%. This makes your conclusion even stronger---the article seems misleading.
- seanmcdirmid 3y ago
  Ya, someone single making $150k/year is paying an effective state income tax rate of 7% (and an effective federal income tax rate of 17.82%). But I get the very conservative simplifications parent was making to make their point.
lettergram 3y ago
Your numbers are way off - that’s only for the initial income tax. You also need to account for the sales tax (impacting cities and counties) and then the circulation of that wealth and the tax on that as well. Ultimately, all money in circulation eventually goes into taxes. Put another way, if I trade something and receive $100 and 10% of that must be sent to the gov. I now have $90. I take that $90 and buy something, that person now has to pay $9 to gov and they have $81.. and so on. Hopefully, people also use that money to generate new goods and thus generate more capital inflows to the state. When that happens, the state gains more wealth via taxes. That loss is likely closer to $11.25B ($150k * 75k) than $1.38B. (Note I’m not using exact numbers, just pointing out the $11.25B upper bound) That said, I do think the article is conflating. In reality: job loss, migration out of the state and generally sluggish economy is going to lead to the deficit, not just the migration.
- nkurz 3y ago
  "All money in circulation eventually goes into taxes" is interesting perspective, but I don't know if it makes sense on a state level. For a high earner, what percentage of their spending stays in California? I'd guess it's not very high. I tried searching, but didn't find any reasonable estimate. This leads to the parallel question, how does this work on a national level? What percentage of American earnings stay in America, and thus eventually go to federal taxes? Probably a higher percentage, but still less than unity. But if we assume it all does, this leads to an apparent paradox: if all the money eventually goes to state taxes, how can all of it also go to federal taxes? I'm not sure this is a helpful way to view what actually happens. What am I missing?

nkurz 3y ago

Good points! You probably realize this, but in case others don't, assuming a 12.3% tax rate may overstate things even more than just being "conservative". Only the portion of income greater than ~$700K is charged at this rate, with everything less than that being charged at lower marginal rates: https://www.nerdwallet.com/article/taxes/california-state-tax https://www.nerdwallet.com/article/taxes/california-state-ta.... Someone who earns less than $350K (and the first $350K for everyone) is at a maximum marginal rate of 9.3%. This makes your conclusion even stronger---the article seems misleading.

seanmcdirmid 3y ago
Ya, someone single making $150k/year is paying an effective state income tax rate of 7% (and an effective federal income tax rate of 17.82%). But I get the very conservative simplifications parent was making to make their point.

lettergram 3y ago

Your numbers are way off - that’s only for the initial income tax. You also need to account for the sales tax (impacting cities and counties) and then the circulation of that wealth and the tax on that as well. Ultimately, all money in circulation eventually goes into taxes. Put another way, if I trade something and receive $100 and 10% of that must be sent to the gov. I now have $90. I take that $90 and buy something, that person now has to pay $9 to gov and they have $81.. and so on. Hopefully, people also use that money to generate new goods and thus generate more capital inflows to the state. When that happens, the state gains more wealth via taxes. That loss is likely closer to $11.25B ($150k * 75k) than $1.38B. (Note I’m not using exact numbers, just pointing out the $11.25B upper bound) That said, I do think the article is conflating. In reality: job loss, migration out of the state and generally sluggish economy is going to lead to the deficit, not just the migration.

nkurz 3y ago
"All money in circulation eventually goes into taxes" is interesting perspective, but I don't know if it makes sense on a state level. For a high earner, what percentage of their spending stays in California? I'd guess it's not very high. I tried searching, but didn't find any reasonable estimate. This leads to the parallel question, how does this work on a national level? What percentage of American earnings stay in America, and thus eventually go to federal taxes? Probably a higher percentage, but still less than unity. But if we assume it all does, this leads to an apparent paradox: if all the money eventually goes to state taxes, how can all of it also go to federal taxes? I'm not sure this is a helpful way to view what actually happens. What am I missing?