While most of the golf world was watching Scott Stallings kick away his five-stroke lead on Sunday afternoon, Phil Mickelson was speaking to a small contingent of media members after his round at PGA West (Palmer Course) about how he is planning “drastic changes” due to the recent increase in federal and particularly California’s state income taxes.
“I’m not sure what exactly, you know, I’m going to do yet,” Mickelson said via ASAP Sports.
“I’ll probably talk about it more in depth next week. I’m not going to jump the gun, but there are going to be some. There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now. So I’m going to have to make some changes,” Mickelson continued.
California’s state income taxes for people earning more than $1 million per year recently rose from 10.3 percent to 13.3 percent. Mickelson’s federal income tax would have risen from 35 percent to 39.6 percent through Congress’ so called “fiscal cliff” agreement.
Social security, also known as the payroll tax, rose by two percent for all working Americans as part of the fiscal cliff agreement.
In total, Michelson’s taxes would have increased by nine percent in just the past few weeks. However, only three percent of that increase would have come from the state of California. Mickelson could be living in any of the other 49 states in the America and still would have seen at least a six percent increase in his tax rate.
Mickelson’s “drastic change” is most likely going to simply involve a move to another state.
I agree. Moving from California to Florida or Texas — states that have no state income tax — isn’t so drastic. As a matter of fact, the move is quite common. The Manhattan Institute released a report on the great California “exodus” last September:
For decades after World War II, California was a destination for Americans in search of a better life. In many people’s minds, it was the state with more jobs, more space, more sunlight, and more opportunity. They voted with their feet, and California grew spectacularly (its population increased by 137 percent between 1960 and 2010). However, this golden age of migration into the state is over. For the past two decades, California has been sending more people to other American states than it receives from them. Since 1990, the state has lost nearly 3.4 million residents through this migration.
This study describes the great ongoing California exodus, using data from the Census, the Internal Revenue Service, the state’s Department of Finance, the Bureau of Labor Statistics, the Federal Housing Finance Agency, and other sources. We map in detail where in California the migrants come from, and where they go when they leave the state. We then analyze the data to determine the likely causes of California’s decline and the lessons that its decline holds for other states.
The data show a pattern of movement over the past decade from California mainly to states in the western and southern U.S.: Texas, Nevada, and Arizona, in that order, are the top magnet states. Oregon, Washington, Colorado, Idaho, and Utah follow. Rounding out the top ten are two southern states: Georgia and South Carolina.
A finer-grained regional analysis reveals that the main current of migration out of California in the past decade has flowed eastward across the Colorado River, reversing the storied passages of the Dust Bowl era. Southern California had about 55 percent of the state’s population in 2000 but accounted for about 65 percent of the net out-migration in the decade that followed. More than 70 percent of the state’s net migration to Texas came from California’s south.
What has caused California’s transformation from a “pull in” to a “push out” state? The data have revealed several crucial drivers. One is chronic economic adversity (in most years, California unemployment is above the national average). Another is density: the Los Angeles and Orange County region now has a population density of 6,999.3 per square mile—well ahead of New York or Chicago. Dense coastal areas are a source of internal migration, as people seek more space in California’s interior, as well as migration to other states. A third factor is state and local governments’ constant fiscal instability, which sends at least two discouraging messages to businesses and individuals. One is that they cannot count on state and local governments to provide essential services—much less, tax breaks or other incentives. Second, chronically out-of-balance budgets can be seen as tax hikes waiting to happen.
The data also reveal the motives that drive individuals and businesses to leave California. One of these, of course, is work. States with low unemployment rates, such as Texas, are drawing people from California, whose rate is above the national average. Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs. Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.
Population change, along with the migration patterns that shape it, are important indicators of fiscal and political health. Migration choices reveal an important truth: some states understand how to get richer, while others seem to have lost the touch. California is a state in the latter group, but it can be put back on track. All it takes is the political will.