Golden Exodus: California shrank by 165,000 taxpayers, $8.8 billion in gross income

New IRS data shows California residents of all ages and incomes fled for more tax-friendly climates.
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Gavin Newsom
California Gov. Gavin Newsom. June 3, 2020
(Genaro Molina/Los Angeles Times via Getty Images)

California residents of all ages and incomes are leaving for more tax friendly climates, and they’re taking billions of dollars in annual income with them.

The Internal Revenue Service recently released its latest taxpayer migration figures from tax years 2018 and 2019. They reflect migratory taxpayers who had filed in a different state or county between 2017 and 2018, of which 8 million did in that timespan.

California, the nation’s most-populous state, lost more tax filers and dependents on net than any other state.

Minus incoming filers, California shed a net 165,355 tax filers and dependents between the two tax years, representing a loss of $8.8 billion in net adjusted gross income.

Texas was the primary destination for California ex-pats, with 72,306 total exemptions leaving to go there. Neighboring Arizona saw 53,476 total filing exemptions come from California. The two states saw a gross income boost of $3.4 billion and $2.2 billion, respectively.

Despite the annual losses, the Golden State still is the nation’s most populous and benefits from a diversified economy that attracts high earners who are more likely to afford what has become some of the nation’s most-expensive cities in which to live.

Brandon Ristoff, a policy analyst with the California Policy Center, reacted to the figures Thursday, saying the IRS' new numbers reflect the exodus of residents they have seen on the ground.

“Billions of dollars of this state's wealth has been sent away year after year from our great state, because of California's bad policies on the economy, education and more,” he said. “California used to be a place where everyone wanted to live, but now California has become a place where people want to leave."

Local officials of states that see perennial population losses and slow growth point to retirees moving to better climates. Annual IRS figures find taxpayers under age 35 accounted for less than one-third of all returns (28.4%) but more than half of all migrant returns (52.9%).

While not all residents are taxpayers, U.S. Census Bureau figures track with IRS estimates.

From July 2019 to July 2020, the Census Bureau estimated 135,000 more people left the state than moved in. California’s tepid growth will lead to it losing a member of the U.S. House of Representatives after reapportionment occurs later this year. That’s a first for the state.