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Why Are People Leaving California?

Why are people leaving California? For many residents, the state has just become too expensive. High housing costs are frequently cited among reasons to leave the Golden State. Other reasons people might leave California include traffic, excessive state regulations, political climate, high vehicle ownership costs and rising state taxes.

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Joseph Anthony
June 10, 2020
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Redwood forests. Breathtaking Pacific beaches. Celebrity sparkle. World-class wineries. With so much in California, it might be a surprise to learn that people are leaving the state in millions. In fact, between 2006 and 2017, more than 6 million people moved away from California. But why are people leaving California? The answer is loaded and complex.

Is California Gaining or Losing Population?

People are moving out of California at record rates. According to reports from the Sacramento Bee, nearly 700,000 people left California in 2018. Only about 500,000 moved to the Golden State. This created a net loss of close to 200,000 people. 

Even with the exodus, the California population is still slowly trickling up thanks to births in the state and immigrants relocating from abroad. Census Bureau data suggests that the population of California is growing at the same rate it did in 1900, when heading west was a significant burden and the state was still being settled. 

The slight uptick might not last long. Californians continue to move out of state and make their homes elsewhere around the country. 

Who Is Leaving California?

People from all walks of life are leaving California, seeking greener pastures in other states. However, the biggest segments of the California population making a run for it include those with lower and middle class incomes. For many of the people leaving the state, California has just become too expensive to enjoy a comfortable quality of life.

Additionally, those with conservative viewpoints are heading out of California. Many of those who lean right are becoming disenchanted with the Golden State’s deep blue, left leaning culture. The numbers back up this phenomenon, as a report from the Los Angeles Times indicates that 40% of Republicans have considered leaving California, compared to only 14% of Democrats. You might say California Republicans are moving to redder pastures.

You’ll also find that people aren’t the only ones leaving California. Big businesses are also relocating to avoid California’s rising expenses and overbearing government regulations. Many of these businesses also find that they have a hard time retaining workers who are paid less than $50,000 a year because housing costs are just too high.

Why is California So Expensive?

California is the second most expensive state to live in in the United States, only after Hawaii. The average home price in California tops $1,000,000, making housing costs unattainable for many. In fact, housing costs top the list of reasons why California is so expensive.

But what makes housing in the Golden State so pricey? Determining why California is so expensive comes with several considerations:

  1. Supply and Demand: Housing is so expensive in California because there simply aren’t enough houses. California has not built enough new houses to support its population growth. A majority of Californians live and work in coastal cities and housing simply isn’t being built there.
  2. Urban Areas are at Capacity: As mentioned above, a majority of Californians live and work in coastal cities. Many of these cities have reached capacity when it comes to housing. High rises dominate the landscape. These cities are jammed with residents. 
  3. Few Incentives to Build New Housing: California passed a piece of legislation called Proposition 13 more than 30 years ago and it has left a lasting impact. Prop 13 limits how much a city or municipality can collect in property taxes. The cap on taxes makes cities think twice about how vacant land is used. They might collect more money by zoning a vacant lot for business than a home.
  4. Approvals are Expensive and Slow: Getting government approval to build new homes and residences in California costs money. It can also take some time. Rules and regulations make new construction difficult and require builders to cut through lots of red tape.
  5. Material, Labor and Land Are Expensive: Another thing that makes California housing so expensive is the costs of materials, labor and land. Limited available land drives up prices and the skilled construction labor required to build quality structures is very expensive.

The five above factors make housing in California some of the most expensive in the nation. As housing becomes more limited and more expensive, many Californians are seeking to escape the state and seeking greener (and more affordable) pastures elsewhere.

How Much Money Do You Need to Live in California?

With such high housing costs, it takes an ample salary to enjoy life in California. According to a recent report it takes a salary of at least $74,371 for a single person to live comfortably in Los Angeles. This number was based on a 50-30-20 rule of budgeting -- which allocates 50% of your spending to food, utilities and housing; 30% to discretionary spending; and 20% to savings. Keep in mind that this figure only provides the basics: a small one bedroom apartment, inexpensive meals prepared at home and very limited discretionary spending. It will take even more money to live the LA dream eating in the nicest restaurants and driving even a mid-range or better car.

Even though a simple life in Los Angeles might cost more than $74,000 a year, it simply isn’t a reality for many people living in the City of Angels. The median annual income in LA is just $48,682, which comes up more than $25,000 short. 

As a result of the discrepancy in income and how much money it takes to enjoy a high quality of life, many people are questioning whether life in California is worth it. There are many pros and cons to living in the Golden State.

Is Living in California Worth It?

For many residents leaving California, it just isn’t considered the Golden State anymore. It costs a lot to live in California. The average apartment in San Francisco costs more than $3,200 a month. These sky-high housing costs make life in California not worth it for many. 

Other cons of living in California include:

  • Significant traffic congestion
  • Unbearable summer time heat and lasting droughts
  • Risk of natural disasters like earthquakes and wildfires
  • Air pollution
  • Pressure to keep up with Hollywood good looks
  • High population
  • Strict government regulations
  • High unemployment percentage (25% as of March 2020)

There are some benefits to living in California. Some people might tell you it’s worth it. Some of the pros of living in California include:

  • Varied landscape with beaches, deserts, mountains and lush forests spanning the state
  • Diverse population
  • Many higher education options
  • Low percentage of obese residents
  • Entertainment opportunities

You’ll see more cons than pros on the lists above. With such high housing costs and other cons, it’s easy to see why people are leaving California. Californians are leaving the state and heading all across the country to escape the negative aspects of life in the Golden State.

Is There an Exit Tax in California?

You might be under the impression that all it takes to leave California is to pack up and head toward your new home. Unfortunately, this isn’t always the case. You need to plan your move carefully so that California will no longer consider you a resident and will stop charging you state taxes.

While California doesn’t charge a specific exit tax, there are some considerations to keep in mind. If you leave California without an exit strategy, the Department of Finance and Franchise Tax Board can penalize you. In fact, if you don’t play your cards right California might consider you a resident for up to 18 months. 

Factors that can be considered when California is trying to determine residency for tax purposes include:

  • The amount of time the you spend in California versus the amount of time you spend out of state
  • The location of your spouse and children
  • The location of your principal residence
  • Where your driver’s license was issued
  • Where your vehicles are registered
  • Where you maintain professional licenses
  • Where you are registered to vote;
  • The locations of banks that you use
  • The locations of your doctors, dentists, accountants and attorneys
  • The locations of church, temple or mosque, professional associations, and social and country clubs of which you are a member
  • The locations of your real property and investments
  • The permanence of your California social ties

It’s important to establish yourself in your new home to avoid paying California taxes even after you leave. A lawyer or tax expert can give advice specific to your situation.

Once you decide to leave California, you need to decide where to go. Californians are choosing new homes across the country.

Where are Californians Moving To?

Californians are moving across the country. Many are seeking lower home prices, seeking to ditch the state’s high cost of living and seeking a higher quality of life. 

According to reports from Mercury News, which serves the San Francisco Bay Area, the state seeing the biggest influx of former Californians is Texas. More than 86,000 former California residents moved to Texas in 2018.

This move makes sense for many reasons. When thinking about Texas vs California cost of living, the differences are staggering. An individual living in California would have to earn more than 27% more than an individual in Texas to enjoy a living wage. Let’s look at the numbers from the Massachusetts Institute of Technology’s  Living Wage Calculator:

  • Housing costs play a huge role in the differences in cost of living between the Golden State and the Lone Star State. Housing costs are more than 59% higher in California than Texas. 
  •  A single person in California might spend close to $3,600 to eat in California. The same single person in Texas might only spend less than $3,000.
  • The cost to raise a child in California might cost $32,000. In Texas, parents only spend on average $25,000.

These numbers suggest that Texas is more affordable than California across the board. They say everything is bigger in Texas, but this obviously doesn’t include cost of living.

Aside from Texas, other top states seeing an influx of Californians include:

  • Arizona
  • Washington
  • Nevada
  • Oregon

California isn’t the only state seeing residents move elsewhere. East Coast states like New York and New Jersey are also seeing populations dwindle. 

Why Are People Leaving New York?

Much like California, people from New York are leaving the state in droves. According to reports from Bloomberg, nearly 300 people are moving out of New York City every single day. This adds up to more than 100,000 people a year.

Much like their West Coast counterparts, ex-New Yorkers are citing rising taxes and crumbling infrastructure as reasons to leave the state. Schools, hospitals and tunnels might be falling into disrepair. Residents of New York City are increasingly finding the Big Apple dirty and overcrowded. Others might feel like the city’s homeless population isn’t being adequately provided with needed resources to get off the streets. The Coronavirus Pandemic also drove many people out of the city, as residents thought it might be easier to practice social distancing in a less populated locale.

Additionally, like with California, businesses are leaving New York. They are relocating to the South and Southeast where they are finding more incentives for doing business and making an economic impact. 

Why Are People Leaving New Jersey?

Much like its neighbor New York, people are leaving New Jersey, too. One of the biggest reasons why people cite moves from The Garden State is work related. Career changes often pull people from New Jersey according to data from United Van Lines.

Another reason people are leaving New Jersey is because they don’t want to retire in the state where they spent their careers. Some want to be closer to family. Others are seeking a lifestyle change.

What Other States See Outbound Residents?

California, New York and New Jersey aren’t the only states seeing an exodus of people. Independent studies and census data suggest that other states seeing more people leaving include:

  • Illinois, especially the Chicago area
  • Ohio
  • Delaware
  • Kansas
  • Iowa
  • Michigan

Many of the moves away from the Northeast and Midwest are driven by economic factors. These states are losing manufacturing as makers move south of the border where labor is cheaper. People are leaving seeking job growth. Many seek lower costs of living. They might be escaping challenges with their state’s budget. They might want to pocket more cash and avoid paying state income taxes. Some want a climate and lifestyle change.

What Other States See Inbound Residents?

While California, New York, New Jersey and other states see people leaving, many states are seeing an influx of new residents. Many of the states with rising populations offer many incentives for people and businesses to relocate. 

Twelve states are considered inbound states. This means they are seeing an increase in the number of people moving there. These 12 states and the percentage  increase of new residents are:

  1. Oregon (64%)
  2. Idaho (63%)
  3. North Carolina (62%)
  4. Alaska (60%)
  5. North Dakota (59%)
  6. Florida (58.4%)
  7. Tennessee (58.1%)
  8. Maine (58%)
  9. Alabama (57.%)
  10. Texas (57%)
  11. Rhode Island (56%)
  12. Washington (55%)

You’ll find that most of these states are dotted across the Northwest and South. These parts of the country are very attractive to new residents as they offer many incentives for moving, from low cost of living to high quality of life.

Moving to Avoid State Income Tax

In addition to offering new residents low costs of living and high quality of life, a few of the states on the list above come with a bonus perk: no state taxes. Some people might move to keep a greater percentage of their paycheck in their pocket.

There are 9 U.S. states that don’t impose income taxes. These states are:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming
  • New Hampshire
  • Tennessee

Taxpayers from California, New York and New Jersey are often hit the hardest by state income taxes. The state income tax rate starts at 13.3% in California, which means those earning an annual salary of $100,000 can plan on forking over $13,300 each year just in state taxes alone. This number comes on top of federal and any municipality taxes you might pay. It might make sense for some to move to avoid state taxes.

When considering moving to avoid state taxes, it is important to think about the steps you’ll need to take to establish intent to settle in the new state. You’ll likely have to get a driver’s license in the new state, register your vehicles in the new state, change your address with the IRS and postal service, register to vote and more. You might also need to change jobs or switch careers entirely in the new state.

Some people try to avoid state taxes by setting up a mail forwarding service in a tax-free state like South Dakota. They use the address they are provided by the mail forwarding service to establish domicile in the tax-free state. With the tax-free state listed as their official residence, they might continue living in California or another high-tax state. 

While avoiding taxes with a mail forwarding service might seem like a good idea, it often catches up with those trying to skirt their financial obligation. They might end up owing back taxes for the years they avoided paying and kept living and working in the other state. Those living abroad but wishing to maintain a U.S. address might benefit from this service. A digital nomad ditching Silicon Valley might benefit from a mail forwarding service. Full-time RVers might benefit from establishing a home base with a mail forwarding service. Those with a permanent home who just seek to avoid taxes might be penalized for establishing an out-of-state domicile with a mail forwarding service. Only a tax professional can provide the answers and advice to know if this is a good situation for you.

Benefits of Moving to South Dakota

Right along side the top states with inbound residents, South Dakota is a dreamy local for those seeking a low cost of living and high quality of life. Known for its breathtaking Black Hills and scenic Badlands, The Mount Rushmore state is happy to see an influx of new residents.

There are many reasons why you might opt to move from California or another high-cost of living state to South Dakota:

  • Housing costs are only 83.8% of the national average
  • The median home price in South Dakota is $193,700 compared to $533,500 in California
  • Utilities cost 93.6% of the national average
  • Transportation costs are 71.2% of the national average
  • Grocery costs are lower than the national average

While healthcare costs are slightly above the national average, the overall cost of living in South Dakota is only 88% of the national average. When you compare this to the fact that the cost of living in Los Angeles is more than 170% above the national average, it’s easy to see why Californians might retreat to South Dakota.

Tax factors are also a significant factor in the decision to move to South Dakota. Seeking South Dakota residency for tax purposes might be a smart move. Residents of The Mount Rushmore State don’t pay state taxes. They also don’t have to pay:

  • Tax on pensions 
  • Tax on Social Security
  • Personal property taxes (Unless they own property)
  • Inheritance tax
  • Intangible tax on investments

You might consider further exploring the benefits of moving to South Dakota. Residents of South Dakota don’t have to have their vehicles inspected annually. Insurance costs are low in South Dakota. With so many ways to save money in South Dakota, it might make sense for those leaving California and other states to start a new life in The Mount Rushmore State.

Do I Need a Permit to Move?

In most cases, you won’t need a permit to move. California and other states do not require you to obtain a permit to leave. However, there are a few municipalities that require you to get a permit to move in to your new home.

There are a few cities across the country that require a moving permit. If you’re leaving California, you might need to get a permit to move to your new home. Moving permits are issued in cities and allow you a place to park your moving truck or even your car.

Cities that require a moving permit are:

  • San Francisco, CA
  • Manhattan Beach, CA
  • Chicago, IL
  • Boston, MA
  • Cambridge, MA
  • Brookline, MA
  • Washington, D.C.
  • Arlington, VA
  • Alexandria, VA
  • Hoboken, NJ
  • Portland, OR
  • Philadelphia, PA
  • Seattle, WA

If you are moving to any of these cities, contact the city government to obtain the permit you need to move. This will make leaving California and getting settled in your new home easy.

Leaving California for Life on the Road

Maybe you’ve had it with life in Silicon Valley and are seeking to experience the world as a high-tech digital nomad. Maybe you’re retiring from the rat race and are ready to see the open road as a full-time RVer. Perhaps you’re considering life working abroad as an expat. The military could be your ticket out of California, too. Regardless of your circumstance, many individuals are leaving California in favor of more wandering ways and a different life experience.

You might find that life on the road isn’t as difficult as you might think. Regardless of why you’re leaving California in favor of a more roving adventure, there are solutions to questions you might have. Campgrounds and hostels offer inexpensive places to spend the night. Many jobs can be done remotely, allowing you to still earn an income as you travel. 

One solution for a problem many living life on the go face is how to manage mail and maintain a permanent address. Mail forwarding services, like those offered by Americas Mailbox,  can give you a home base and permanent address no matter where you are. 

Joining Americas Mailbox can also help you obtain South Dakota residency. As you likely read above, there are many advantages to having an address in South Dakota over California. If you make The Mount Rushmore State your permanent home, you’ll avoid state income taxes, save on vehicle insurance and more.

Making Sense of Why Are People Leaving California

California is home to many quintessential American communities. San Francisco, Los Angeles, Napa Valley, San Diego and other iconic California locales are famous for what they lend to the American experience. However, many people are leaving California for many different reasons.

Though the high cost of living is driving many people away from California, others are leaving in search of a different lifestyle. If your exodus from the Golden State leaves you in need of a permanent address and home base, it might be wise to explore how mail forwarding service from Americas Mailbox can help you establish a new address outside of California. Reach out today to see how Americas Mailbox can help you build a new life with a new South Dakota address.

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