Over the years, anti-tax crusaders have been desperate to prove that California's wealthiest residents, along with the companies they own, are leaving the state in large numbers because the cost of doing business is just too high - certainly compared with places like Texas. But it's not true - never has been, never will be. Yes, California does lose people and businesses, but the numbers are generally offset by gains in population and business formations. The reason is clear: California, despite all its hassles, cannot be duplicated. That's the trick, you out-of-state dolts. As LAT columnist Mike Hiltzik points out, venture investments in the state totaled $14 billion in 2012, more than half of all such investments in the U.S. From his column:
Job poaching campaigns like Perry's typically create a publicity buzz more than they make an economic difference. For California, business departures and arrivals tend to balance out each other. Interstate outflow accounted for only 2% of all job losses in the state from 1992 through 2006, according to a 2010 report from the Public Policy Institute of California; interstate arrivals for only 1% of jobs gained. By contrast, homegrown company births and expansions produced 74% of gains, and the deaths and contractions of local businesses for 68% of the losses.
As for the very rich seeking lower-tax locales, well, it just doesn't happen very often - despite the fact that the state's wealthiest people are getting socked with higher tax rates and a few of them, notably golfer Phil Mickelson, are griping about it. Stanford Prof. Cristobal Young told NYT columnist James Stewart that "neither tax increases nor tax cuts on the rich have affected their migration rates."
Professor Young said his study looked at every millionaire tax record filed in California over the last 20 years, and "neither tax increases nor tax cuts on the rich have affected their migration rates." He said that the two major tax overhauls before the recent increase didn't have any effect on migration rates of millionaires. "Among the very richest, people making more than $2 million, out-migration actually declined slightly after the 2005 millionaire tax," he said. Why didn't they move? Professor Young said that for most people, even the very affluent, it's not that easy, since most successful businesses and high-paying jobs are tied to specific locations. In addition, "entrepreneurship and earning power are clustered in highly competitive regions like Silicon Valley, Los Angeles and New York City," he said. "People making over a million are typically close to their peak income years, and are enjoying the fruits of long-term career investments. This is hard to walk away from."