January 1, New California Tax Proposal Could Spur Mass Exodus from State

An ambitious proposal in California would create a single-payer healthcare system, but it would also increase the state’s tax revenue by almost double, potentially triggering a mass exodus from the state.

According to a report, Jared Walczak, vice president of state projects at the Tax Foundation, said that the legislation would impose a $163 billion per year tax increase — effectively doubling state collections. That increased revenue comes with a cost, though, one borne by taxpayers that could push residents to lower-tax states.

If the proposal is enacted, “you would expect to see a substantial exodus of businesses and middle- and high-income earners,” Walczak said.

Residents have already left the state in droves, with California’s population declining by 0.8% last year while other states like Florida and Texas saw increases.

“All things equal, people would want to locate in areas in which their after-tax income would be maximized,” said Kyle Pomerleau, a senior fellow at the conservative American Enterprise Institute. “So if they could do the same exact job and live in a place that was just as nice but they could earn more money after taxes … they pick the place with the lower tax burden.”

Under the new proposal, the top marginal income tax rate would rise to 18.05%, a significant increase from the current 12.3% rate that those at the top of the bracket are paying.

Some groups are already lobbying against the measure.

“Completely abolishing the current system in face of unrelenting pandemic by annually taxing Californians hundreds of billions of dollars is not the solution,” said Preston Young, a policy advocate for the California Chamber of Commerce.

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Aggressive new California tax hike proposal could accelerate exodus from state