There was a time in the 1970s when California was the fastest growing state in the US. Thanks to their insane spending habits, especially on public employee pensions, California’s taxes have skyrocketed while their economy has tanked. That’s bad news but it isn’t the worst news. It looks like there’s about to be a major exodus of rich people leaving the state:

The Golden State’s new 13.3 percent income tax on top earners prompted golfer Phil Mickelson to say earlier this month he was considering a move, and according to the accountants who advise millionaire athletes, he was just saying what a lot of jocks were already thinking. Federal taxes on the top income bracket just rose by roughly 5 percent, and, while there’s nothing rich athletes can do about that, they are paying attention to which states dip into their game, and how much they take.

“They’re going to have an exodus of people,” said John Karaffa, president of ProSport CPA, a Virginia-based firm that represents nearly 300 professional athletes, primarily in basketball and football. “I think they’ll see some [leave California] for sure. They were already a very high tax state and it’s getting to a point where folks have to make a business decision as well as a lifestyle decision.”

Athletes staying in California are getting hit exceptionally hard. The top federal tax rate just jumped from 35% to 39.6%. California’s top tax rate just jumped from 10.95% to 13.3%, meaning athletes like Phil Mickelson will pay hundreds of thousands of dollars more in income taxes:

It adds up, says Karaffa. As tax season enters full bloom, he expects to see an uptick in the number of clients who will consider leaving California. Under a hypothetical calculation, the tax difference for a single professional athlete making roughly $10 million a year between being a resident of California versus Florida is around $800,000 annually.

It isn’t just Lefty that’s taking notice:

Los Angeles Angels outfielder Torii Hunter, who recently signed with the Detroit Tigers, made headlines last year when he announced a move to Texas because of the state’s lack of income tax. The move didn’t shelter his game checks from income taxes, but it did allow him to save taxes on other income, including for endorsements and autograph signings.

Hunter did save taxes on his $12 million salary by leaving California to sign with Detroit, where the Michigan state income tax is a flat 4.35 percent. And more and more ballplayers are taking taxes into account when signing with new teams or giving their teams permission to trade them.

High profile athletes signing a 7-year, $120 million contract with Florida or Texas teams would save almost $10 million over the length of the contract by not signing with a California team. That’s like adding a year to their contract. That isn’t a difficult decision.

Deroy Murdock nails it with this article:

Last year, a record 1,788 Americans renounced their citizenship, mainly in favor of countries with lower taxes and friendlier political rhetoric.

Golf great Phil Mickelson generated headlines this week when he suggested that high taxes might drive him from his native California or perhaps America. “There are going to be some drastic changes for me,” Mickelson said. “If you add up all the federal (levies) and you look at the disability and the unemployment and the Social Security, and the state, my tax rate’s 62, 63 percent.” Imagine keeping just 37 cents of every dollar you earn. Is that a fair share?

Travis Brown, author of “How Money Walks,” demonstrates how Americans between 1995 and 2010 shifted some $2 trillion in wealth by abandoning California, Illinois, New Jersey and other high-tax states and unpacking in low-tax states such as Florida, Nevada and Texas.

“After spending several years mapping and analyzing these data, one correlation keeps popping up: Income moves to where it is most welcome, tax-wise,” Brown writes. “Money walks because opportunity talks.”

Whethere we’re talking about high profile athletes or captains of industry, tax rates matter. States that attempt to gouge these people will hurt themselves because athletes won’t put up with their thievery.

Think about this. In every census that I’ve been alive, California gained congressional districts through reapportionment. Until this time. For the first time in California’s history, they didn’t gain districts. If they continue their failing tax-the-rich strategy, I’d bet they’ll lose seats after reapportionment in 2021.

2 Responses to “Californians leaving?”

  • Jethro says:

    Well, I am certain Californians aren’t heading to Minnesota to save a ton on their taxes.

  • walter hanson says:

    No, but if the DFL lawmakers don’t get their act together Minnesotans will flee to Wisconsin. Isn’t Walker proposing an income tax cut?

    Walter Hanson
    Minneapolis, MN

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