Goodbye California, New York, Illinois: Blue State Exodus Will Accelerate

Mike Mish Shedlock

People are exiting "blue" states and the reason isn't the weather. The Trump tax cuts will accelerate the exodus.

A Chicago Tribune commentary says Hello, exodus deniers: No, it isn't Illinois' weather.

For four years in a row, Illinois has lost population in alarming numbers. In 2017, Illinois lost a net 33,703 residents, the largest numerical population decline of any state. That’s the size of St. Charles or Woodridge or Galesburg. Wiped off the map. In one year.

Asked why they were leaving people overwhelming said taxes or the illinois budget mess.

“We could handle the cold, avoid the crime and pay the tax. But the government turned on us (property, income, sales, parking, red-light/speed cameras, bags, soda). Never-ending. Tired of paying for everyone else's retirement before mine,” said one respondent.

Trump Tax Cut Will Accelerate the Trend

The Wall Street Journal reports blue states will lose millions of people in the years to come—and they aren’t ready. It's a case of So Long, California. Sayonara, New York.

As the Trump tax cut was being debated in December, California’s Gov. Jerry Brown called the bill “evil in the extreme” and fumed that it would “divide the hell out of us.” He’s right—but in the end, this change could be good for all the states.

In the years to come, millions of people, thousands of businesses, and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states. This migration has been happening for years. But the Trump tax bill’s cap on the deduction for state and local taxes, or SALT, will accelerate the pace. The losers will be most of the Northeast, along with California. The winners are likely to be states like Arizona, Nevada, Tennessee, Texas and Utah.

For years blue states have exported a third or more of their tax burden to residents of other states. In places like California, where the top income-tax rate exceeds 13%, that tax could be deducted on a federal return. Now that deduction for state and local taxes will be capped at $10,000 per family.

Consider what this means if you’re a high-income earner in Silicon Valley or Hollywood. The top tax rate that you actually pay just jumped from about 8.5% to 13%. Similar figures hold if you live in Manhattan, once New York City’s income tax is factored in. If you earn $10 million or more, your taxes might increase a whopping 50%.

About 90% of taxpayers are unaffected by the change. But high earners in places with hefty income taxes—not just California and New York, but also Minnesota and New Jersey—will bear more of the true cost of their state government. Also in big trouble are Connecticut and Illinois, where the overall state and local tax burden (especially property taxes) is so onerous that high-income residents will feel the burn now that they can’t deduct these costs on their federal returns. On the other side are nine states—including Florida, Nevada, Texas and Washington—that impose no tax at all on earned income.

Delusional liberal interest groups want blue states to respond to the Trump tax cuts by soaking their rich residents even more. If that happens, our best advice to blue-state residents is simple: Git while the gittin’s good.

Make a New Plan Stan

We have plans in place to get the hell out of Illinois. I suspect we will be gone in about 2 years.

Mike "Mish" Shedlock

Comments (39)
No. 1-39
Greggg
Greggg

Just wondering how long those talented millennials are going to tolerate living in a van or renting crawl spaces just so they can work for google. It ain't what you make.... it's how much you have left over after expenses, and you'd think after all that education, they'd realize that. Come to think of it, why couldn't google figure out that California was so busy with welfare programs that they couldn't pay for supporting infrastructure? See Victor Davis Hansen for complete analysis of the problems.

truthseeker
truthseeker

Mish I just sent my remarks and it’s saying Updating

Snow_Dog
Snow_Dog

https://youtu.be/CBGyRB67gWc

“Asked why they were leaving people overwhelming said taxes or the illinois budget mess.”

There is no way out of ill annoy.

Carl_R
Carl_R

With all the free $tuff they give away, you'd think they would be attracting more people. Oh wait, they probably are, but it's the productive, working people that are leaving, and in enough numbers to offset the new arrivals.

JonSellers
JonSellers

If you have an income of $10 million/year and you think people are going to move from beachfront Cali or NYC to some $hithole town in TX you're delusional. Lower class people move to Amarillo and Beaumont. Good jobs sucking oil out of the ground. Real Americans want a real life-style.

Runner Dan
Runner Dan

Lower class people? Try working class people. The type that are not politicians or engaged in bribing politicians, so that they can live close to or on beachfront Cali.
However, in a sense you are correct, as working class people are now typically the lower class instead of the middle class like in the old days.

Carl_R
Carl_R

Working class people are the lower middle class. Government employees are the middle class (and in retirement, will be upper middle class since their pensions are significantly more generous than social security).

On The Beach
On The Beach

Yeah, that's all we need........millions of liberal voters infesting the red states.

CzarChasm-Reigns
CzarChasm-Reigns

I'm waiting for Trump's tweet that the blue states will be paying for border walls around the red states....

shamrock
shamrock

So states like Texas are actively seeking residents from New Jersey, New York, and California. Why do they want these people jamming up their schools, hospitals, and welfare roles? Why do they want these immigrants stealing Texas jobs? Texas first!!!

themonosynaptic
themonosynaptic

Who wants a cheeseburger bet: California's population and median wealth in constant dollars will both be higher in 5 years time than today? I'll even let you win if there is a major earthquake that temporarily hits at an inconvenient time for my side of the bet :)

Jojo
Jojo

Yea! Buh-bye....

themonosynaptic
themonosynaptic

Get ready Texas, here comes a bunch of people who paid $750,000 for a small three bedroom house, just sold it for $1.4 and are coming to a neighborhood near you ... oh and they are left wing.

themonosynaptic
themonosynaptic

Note on bet: it to be an In'n'Out cheeseburger

whirlaway
whirlaway

If anybody left Woodside, CA and took residence in Bumblecrap, MS or Tumbleweed, TX, let me know!

themonosynaptic
themonosynaptic

@Runner - there are plenty of right wingers in California, and they tend to live in the central valley and thus might be most likely to up and move, however I think that most of the people moving will be from L.A. and the Bay Area. Many will be moving to tech jobs and will thus lean left - they will be the ones most likely to vote, most likely to donate to local candidates, etc.

Also, I dispute that California's population has been dropping,

"In the years to come, millions of people, thousands of businesses, and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states. This migration has been happening for years."

With all respect to the WSJ (even though I have none), the population of California has increased:

2000 = 34M
2005 = 36M
2010 = 37.5M
2015 = 39M

themonosynaptic
themonosynaptic

Also, in the last 20 years a new term has driven the capital market's increase in wealth: FAANG stocks. Guess where 4 of the 5 comes from. Exodus of businesses my derriere!

themonosynaptic
themonosynaptic

The Editorial board of the WSJ really need to read "The New Geography of Jobs".

flubber
flubber

I knew of a manufacturing company that made the move from the Bay area of California and relocated to Carson City, NV. Most of the employees that could logistically make the move (spouse's job considerations etc.) did relocate and loved the move. 3 to 4 times the size of house for same price they would pay in California or keep same size house and have the extra money for college education for kids or for whatever else they wanted.

whirlaway
whirlaway

It is more likely that very few people are moving in to California rather than lots of people moving out. Also people are moving in from other countries than from other states.

The people moving out are likely to be retirees or 55+ year olds who want to go into semi-retirement. They sell their homes at huge profits to those cashing in on the tech stock boom. And in many cases they go to other parts of the state eg Sacramento area rather than out of state.

To credit all of the moves to tax rates is ludicrous. Also, if there was such a huge exodus real estate prices should crash Detroit style. We are seeing the exact opposite in California.

AWC
AWC

The demise of California's economy is greatly exaggerated. It will most likely remain among the worlds top 7 or 8, or so, for sometime. As for Moonbeam, he's disposable.

AWC
AWC

It's just California Envy, as usual. When things get squirrelly enough, it'll swing to the right again. Always does.

Stuki
Stuki

@Greggg

While the Googles of the world pay well, what’s attracting young people, besides the work itself, is appreciation of stock options. Which, at the levels of the past 5 years, is largely a result of the same Fed welfare policy keeping New York flush.

There are good businesses at the core of the big tech giants, so it’s not as if Cali is some NYC style welfare colony 100% dependent on nothing but handouts extracted from the rest of the country. But even so, much of the current excess is all due to the same crass Fed driven wealth redistribution that makes Manhattan appear somehow different from Caracas. Once that ends, assuming the vast and increasing majority of Americans who are being robbed barren to keep the theft train afloat, has the sense to end it at a stage prior to current Venezuela, Google recruits will relocate to campuses Google will build in less extractive environs.

Engineers in virtually all companies less pumped up than the FAANGs and some startups, once they have been in the Valley for more than a few years and are looking to settle down and raise a family, seem to pine for the day they can keep their job and easily commute back and forth to Reno in their sleep. Or when their job, along with enough of their professional ecosystem, can move there altogether. And those are guys making just as much, often more, than recent Googlers in pure salary.

It’s just that they are less starry eyed about being hype-stock millionaires with a nice house in Palo Alto 5 years after hire. Or about their prospects of “doing a startup” and netting the same times 10+. Heck, Reno is booming already, and the exodus hasn’t even gotten remotely off the ground. Give the stock market a Hussman style 10+ year nothing, which will inevitably set California off on an attendant pension driven extractive spree, and that development will really take off.

Working Brain Cell
Working Brain Cell

FWIW, streeteasy, a website for finding housing in New York City, says the vast majority of New Yorkers that leave go to pricy suburbs or large cities like Chicago, San Francisco or Los Angeles. Sure some go to lower tax places like Florida or Texas. But not as many as Mish claims. Mish could be right but it is worth exploring further. https://streeteasy.com/blog/where-are-new-yorkers-moving-other-expensive-places/

Working Brain Cell
Working Brain Cell

I am not a bot, I am a free man

Carl_R
Carl_R

It takes a long time for trends to reverse. Detroit started it's problems in the 70s, and the city didn't fully implode for four decades. Illinois has had issues since I lived there in the 70's, but they are building, and it could face a crisis in another ten years. California is a long way off from a crisis, but that doesn't mean it can't happen there. Adopt enough silly policies, and keep them in place long enough, and problems will happen in time.

stillCJ
stillCJ

Editor

I hope you are correct, AWC, I don't want to have to move again. CA politics is getting to be almost as bad as the state I escaped from 13 years ago - Ill annoys.

RonJ
RonJ

"With all respect to the WSJ (even though I have none), the population of California has increased" You missed the part of the article which stated "in the years to come." Has is not the future.

ElPoquitoGrande
ElPoquitoGrande

Be careful what you wish for... a flood of moneyed up Californians washing into your sleepy flyoverland burg is a very mixed blessing. And before you get too fired up about "those damn Californians" you should know that most of the people here are from other states.... and a lot of us just came to make our money and go back. This doesn't fit the "us vs them" thing you learn on The Angry Channel, but it's actual, non-corporate sponsored reality.

themonosynaptic
themonosynaptic

Hi RonJ. The sentence I was referring to was the one after: "This migration has been happening for years."

Wolfpack12
Wolfpack12

Let them crash and burn.

ipso_facto
ipso_facto

Mish, If you finally flee Illinois will you travel the globe taking photos of fantastic places?

Liberaldisdain
Liberaldisdain

Us folks down south want all you blue staters to stay home in the mess you created. We don't want you, we don't need you, and we sure as hell don't want your politics to follow you.


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