For Californians There Is Somewhere To Run

By increasing it's maximum tax rate, California is driving out it's most productive - therefore wealthiest - citizens.

According to a new report from the Golden State’s Franchise Tax Board, the top 1% of earners paid $25.7 billion in state income taxes in 2007. Two years later, the most recent for which data are available, that figure dropped by half — to $12.3 billion.

Researchers note that the economic downturn contributed to this drop. But that’s not the only cause. A huge number of high-income taxpayers have simply left the state.

Between 1992 and 2008, California suffered a net loss of 869,000 tax filers. About 3.5 million moved into California, while 4.4 million left.

Those that left were disproportionately wealthy. The average adjusted gross income for people leaving the state over that period was $44,700. Meanwhile, the average person moving into California posted income of just $38,600.

Of course this is nothing new. The genuises running the state have known this for years. Over three quarters of a million taxpayers have fled the state since 1992, taking their skills, their jobs,their wealth with them to less greedy states that respect their work ethic.

The mass migration of top earners has seriously damaged the Golden State's tax revenues. Ratcheting up rates might provide an influx of cash in the short term. But over time it will drive out payers and shrink the tax base.

Indeed, California lost a stunning $44 billion in tax revenue from the 869,000 taxpayers that left the state between 1992 and 2008. And that figure is probably too small. It only counts earnings for one year — the difference between paying state taxes one year and not paying them the next year, after the payer moved.