Professional golfer Phil Mickelson must feel like the guy who’s driving the ball collector while the driving range is still open.
Earlier this week he complained about California’s crushing tax burden: “If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent. So I’ve got to make some decisions on what I’m going to do.” Since he makes about $40 million a year, ESPN called Mickelson’s comments a “blunder,” while the network’s golf writer warned him to “just play golf.” Reuters said the golfer had “taken a mulligan” when he apologized for the comments this week. “Were Phil Mickelson’s tax comments insensitive?,” the presumably sensitive Los Angeles Times asks in an online poll.
The mainstream media might find Mickelson’s comments insensitive, but mainstream Americans do not. It is the governors and legislators in certain state capitals who are insensitive when they enact punitive tax codes that drive people across their borders. Not only is this insensitive, but it ignores the consequences of a shrinking tax base.
When class warfare and emotion are removed from the debate, a clear and convincing trend is obvious: States with the highest tax burdens tend to lose the most people, and those with the lowest tax burdens tend to gain the most.
This conclusion is derived by analyzing Internal Revenue Service migration data and comparing that with state and local tax burdens. The Tax Foundation has a web-based migration calculator that enables anyone — including journalists — to make quick and easy comparisons between states on tax flight. The calculator shows the numbers of tax filers who moved from one state to another, and how much income shifted along with them.
Between 2009 and 2010 (the most recent tax year for which IRS data is available), California lost over 41,000 residents (including taxpayers and their family members) to other states, the third-largest net outflow in the country. And that was before last year, when the state’s income tax went up again to a top marginal rate of 13.3 percent, along with an increase in the sales tax. In 2010, Californians faced the nation’s fourth-highest tax burden, according to the Tax Foundation.
Where did the most Californians go? Texas. Nearly 15,000 more Californians moved to Texas than vice versa. Texans enjoy the nation’s sixth-lowest state-tax burden, and their state gained over 93,000 residents from other states, the highest figure in the country.
So if Governor Jerry Brown and the California legislature plan to ever balance the budget, they can start by figuring out how to stop nearly $380 million in annual income from leaving their state to Texas alone. Those incomes will not be subject to state and local income, property, and sales taxes because these individuals have vanished from the tax rolls, and their purchasing power will no longer benefit California’s economy.
However, there will be no public-policy changes if powerful elected officials are in denial. And, make no mistake, they are in denial.
The chairman of California’s state-senate budget committee told the San Francisco Chronicle after Mickelson’s remarks that he had “never seen tax flight so significant that it should make a financial difference or influence public policy.” Really? Perhaps the media should ask the senator how California is supposed to make up for over $1 billion in annual income fleeing the state. Again, that was just between 2009 and 2010. The senator might want to spend a few minutes using the tax-migration calculator to determine how many billions California has lost since he’s been in office.
Let’s look at another golfer and state that were mentioned in the tax flap. Tiger Woods said this week that he left his native California and set up residence in Florida because Florida has no income tax. Florida trails only Texas in attracting people. A net of more than 30,000 members of taxpaying households moved to Florida from 2009 to 2010, bringing with them nearly $3.5 billion in annual incomes.
And so it goes. Don’t expect too many wealthy professionals to come out in support of moving to Illinois, with the nation’s 11th highest tax burden, or New York, with the nation’s top tax burden. New York lost over 67,000 people during this period, and Illinois lost nearly 41,000 – the highest and fourth-highest net migration rates in the nation, respectively.
Sometimes government officials stumble on the truth without realizing it. Governor Brown’s office, attempting to justify continued spending on his favored constituencies while downplaying the importance of tax migration, said, “We have to look beyond our personal interests to where we are going as a society.”
They should heed their own advice.
— Jim Pettit is an independent public-policy analyst who has called attention to the importance of tax flight in national, state, and local media outlets across the country. He is on Twitter at @JamesMPettit.