California houses a lot of iconic sites, great scenery, luxurious infrastructure, dreamy beaches, and unique employment opportunities. In addition, its economy ranks 5th in the world. But the question is, why then are lots of people moving out of California?
A recent study by UC Berkeley revealed that over half of the residents of California are looking into moving.
The state’s population has been reducing because of national migration since 2000; however, natural population increase and international migration have kept California’s population growing at a 0.35% rate as of 2016.
Below are our best estimations of what a California resident could consider when planning a move, and where the calculation might land them.
Almost 700,000 people relocate out of California just last year. There are different reasons for even permanent residents of California to leave the state and move out of it.
1. High Cost of Living
California is an expensive place to live. The cost-demanding moving candidates start from people in financial issues to those on a constant income, such as retirees and a new group formed in the pandemic time – an employee who can work remotely.
Consider what an interstate ‘price parity’ cost of living index of California from the Federal Bureau of Economic Analysis reveals to us about affordable moving possibilities, it shows the state is expensive to live.
2. Rising State Taxes
The marginal income tax rate is currently at 13.3% but legislators want to increase it to almost 17%. The move would not just affect rich residents of California but also small entrepreneurs, most of whom are facing challenges related to COVID-19 lockdowns and shutdowns. The sales tax is more than 7% already and there is a $0.50 gas tax.
Furthermore, residents of California are not even allowed to deduct most of their state taxes from their federal taxes all thanks to the Tax Cuts and Jobs Act by President Trump. Even though taxes in other states are high, California is one of the two states with a tax rate of more than 10% (the other is Hawaii). What that means in real life is highlighted below:
Simply put, someone who makes $50,000 per annum would be paying $9,679 in state and federal taxes. Someone who makes $100,000 per year would have to spend $28,923. Those that make $500,000 per annum would be paying a huge $210,949.
To complicate the matter, state legislators in California are now discussing retroactive taxes as well as an exit tax for rich residents of the state who leave California for another state. AB2088 doesn’t only seek to create a wealth tax in California but also force rich old California residents to pay the tax for nearly 10 years after they’ve left.
3. Political Problems
A lot of residents of California are in support of the policies of their state. However, a lot of conservative and even reasonable voters feel that California is moving too far to the left. Ben Shapiro, a conservative journalist talked about his personal decision to move out of state, stating increasing union influence, limitation on law enforcement officials, looting, and the stop to standardized testing in state universities as some of the factors that aid his decision to relocate to another state.
Others mentioned that they feel that their votes in California don’t count while others still complain that politicians focus on the needs of large cities while leaving the needs and wishes of residents of rural areas unattended. COVID-19 restrictions in the state have placed an extra strain on residents. 19 percent of California workers had filed for unemployment as of April 2020.
Even though some industries have resumed operation, others are affected by continued restrictions. Restricted businesses include gyms, restaurants, personal care services, bars, hospitality, and the tourism industry. Other states don’t have so many COVID-19-related lockdowns as California does, which causes many business owners to seriously look into leaving the state to another one where they have hope of attaining success in their business.
4. Unemployment
Not everyone considering a move is just being cost-conscious. Job opportunity and wage levels are huge factors for others who know that highly affordable states usually come with lesser incomes. To calculate opportunities, We considered the annual average wages from the second quarter of 2020, making a national pay scale.
The maximum national average wages were seen in Massachusetts at $81,640, then $79,040 in New York. California ranked 3rd at $76,336 and is an important reason many people stay. On the fourth position was Washington at $74,048, Connecticut at $73,164, and New Jersey at $71,552. Many factors affect the value of those incomes.
Begin with being able to keep a job. Consider the average unemployment rates from 2015 to 2019 and you find North Dakota as the state in which you don’t have many risks of losing a job with a median 2.7% unemployment rate. Hawaii was the next and New Hampshire at 2.8%, Nebraska and Vermont were at 3%, followed by Iowa and South Dakota at 3.1%.
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