It seems that even with the beautiful weather and stunning coastlines, many people are still leaving California.
Between 2019 and 2023, the state witnessed a remarkable net income drop, totaling $91.4 billion, according to IRS data, making it the largest deficit across the nation.
Recent statistics also indicated a net outflow of $11.9 billion in 2022-2023 alone, again placing California at the top for the greatest loss in that timeframe.
This trend raises alarm for economists, who describe the situation on the West Coast as “a major concern” that could worsen, particularly as some states explore potential wealth taxes for billionaires.
Many who departed from California relocated to Texas, Nevada, and Arizona, while others ventured further to places like New York or Washington state.
Jake Krimmel, Senior Economist at Realtor.com, mentioned in a statement that a significant outflow of residents could have severe impacts on local government finances.
“It’s not merely about the number of retirees, but the wealth and income profiles of those retiring,” Krimmel explained. “As a state known for high incomes, when Californians choose to move for larger homes or better affordability—often for quality of life reasons—substantial amounts of money leave the state, which is reflected in these numbers.”
He noted that two major factors driving this exodus are steep taxes and a shortage of housing.
“California has struggled with housing affordability for decades, largely due to an ongoing housing shortage,” he said, adding that in states like Texas and Florida, people are beginning to realize they can secure more space for much less money.
Tax planner and expert Alexander Efros pointed to California’s tax structure as another reason for residents leaving.
He compared the tax rates, noting, “In Florida, the top corporate tax rate is 5.5%, whereas in California, it’s 8.84%. When it comes to individuals, the difference is even more pronounced; Florida has no personal income tax, but California’s marginal rate is 13.3%.”
According to the Tax Foundation’s 2026 State Tax Competitiveness Index, California ranks 48th, and many people are opting to leave due to the potential savings available elsewhere.
“Currently, we’re seeing a trend of increased departures from California,” Efros said. “It’s interesting to hear people express relief upon receiving their tax bills and realizing they aren’t paying five or six figures to live here anymore.”
Additionally, California does not offer a preferential tax rate on capital gains, meaning any gains are taxed at the individual’s marginal rate regardless of how long they held the stock.
“For instance, if a California resident sold stock for a $1 million gain, they’d face a $133,000 state income tax,” Efros explained to those contemplating a move. “If that person relocated to Florida and it was legitimate, they could potentially save that $133,000 just by moving.”
Regardless, many Californians are sitting on substantial unrealized gains, especially given the stock market’s recent highs.
So, where does that place these individuals?
The primary destination for Californians leaving is Texas, with reports indicating that from 2019 to 2023, nearly $28 billion in gross income—around 230,000 taxpayers—moved to Texas.
Jenny Wallace, a real estate agent in Texas, noted that both 2022 and 2023 have experienced significant growth in new homebuyers, a trend that shows no signs of stopping.
“The calls I received were crucial; there were periods I was closing ten deals a month,” Wallace commented. “Now, there’s another wave of newcomers eager to capitalize on the benefits.”
While experts anticipate this migration may persist, Krimmel suggested that a shift in companies pushing for remote work might present some relief.
“Previously, individuals could live in Arizona or Texas while maintaining California-based high-paying jobs remotely,” he observed. “If they’re required to return to the office, it may lead to changes in housing decisions, depending on how appealing the workplaces are in those states.”
