Long-run U.S. population movements have been driven more by natural amenities than by jobs, and California, rich in both uniform and complementary climates, should be a persistent net gainer of domestic migrants. It has instead lost residents to other states every year since about 1990. This paper argues that its amenities are unchanged and that the location rents they generate have been captured politically. Capture through a land tax would be borne by landowners and would move no one. Capture through mobile tax bases-above all a steeply progressive income tax-and through restrictions on housing supply does move people, and moves particular people. Where the revenue also finances redistribution, high earners pay far more than the value of the services they receive, which pushes them out on a second count; the income tax also raises the pre-tax wages firms must pay, so jobs leave with households. Proposition 13 shifts capture onto mobile tax bases and locks long-tenured owners in place, so observed out-migration understates the underlying pressure. Internal Revenue Service data show that in 2022-23 California’s out-migrants outnumbered its in-migrants by 40 percent overall but by 64 percent among households with incomes of $200,000 or more, a pattern reversed in low-tax states. A simple cross-state comparison, which cannot hold production advantages constant, shows no relation between tax burdens and natural amenities, suggesting that competition among amenity-rich states limits capture; California, which taxes well beyond what its neighbors charge, loses residents disproportionately to them. Border comparisons and data on homeowners’ length of residence are consistent with the argument.

Here is more from Philiip E. Graves, via the excellent Kevin Lewis.

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