The California Exodus Is a Verdict on Taxes and Regulation

When people and businesses leave a state in large numbers, they are rendering an economic judgment

California has experienced in recent years a significant outflow of residents and businesses, a movement that has prompted much debate about its causes and significance. While the reasons people and businesses leave any place are various and complex, the scale of the departure from California, and the destinations to which people and businesses have moved, point toward an economic verdict: that the state’s high taxes, heavy regulation, and elevated cost of living have made it, for many, a place no longer worth staying.

The Verdict of Departure

When people and businesses leave a place in large numbers, they are rendering a judgment about that place, a judgment expressed not in words but in the consequential act of departure. The decision to leave California, to uproot one’s life or relocate one’s business, is not made lightly, particularly given the state’s natural beauty, its climate, and its many genuine attractions. That significant numbers have made this decision despite these attractions suggests that something has made staying, for them, no longer worthwhile.

The destinations to which people and businesses have moved are revealing. Many have relocated to states with lower taxes, lighter regulation, and lower costs of living, states that offer a more favorable economic environment even if they lack California’s natural advantages. This pattern, in which people and businesses move from a high-tax, heavily regulated, high-cost state to lower-tax, less-regulated, lower-cost alternatives, suggests that the economic environment is a significant factor in the departure.

The analysis of these migration patterns, conducted by economists and policy researchers at institutions including the Cato Institute and organizations studying state economic competitiveness, has identified the economic environment, the taxes, regulations, and costs, as a significant driver of the movement, even as other factors also play a role. The departure is, in significant part, an economic verdict, rendered by those who have voted with their feet.

What the Verdict Reveals

The economic verdict rendered by the California exodus reveals something important about the relationship between economic policy and human choice. People and businesses respond to the economic environment, to the taxes they must pay, the regulations they must navigate, and the costs they must bear. When this environment becomes too burdensome, when the costs of remaining outweigh the benefits, people and businesses respond by leaving, taking their economic activity, their tax revenue, and their contributions elsewhere.

This responsiveness places a real constraint on economic policy, for a state that imposes excessive taxes, regulation, and costs will find that people and businesses respond by departing, undermining the very revenue and economic activity that the policies were meant to support or that the state depends on. The exodus is a reminder that people and businesses are not captive, that they can and will respond to a burdensome environment by leaving, and that economic policy must reckon with this responsiveness.

The verdict also reveals the value that people and businesses place on economic freedom, on lower taxes, lighter regulation, and the freedom to keep more of what they earn and to operate with less interference. The willingness to leave a state of such natural advantages for places that offer greater economic freedom demonstrates how much that freedom is valued, how significant a factor it is in the choices people and businesses make about where to live and operate.

The Defenders’ Response

Defenders of California’s policies offer various responses to the exodus, disputing its scale, attributing it to factors other than economic policy, or arguing that the state’s policies are worth the costs they impose. Some of these responses have merit, for the causes of migration are indeed complex, the scale is contested, and the value of the public goods that taxes fund is real. The exodus does not by itself prove that California’s policies are wrong, only that they impose costs that some find unacceptable.

But the defenders must reckon with the verdict that the exodus represents, with the judgment rendered by those who have chosen to leave. The departure of significant numbers of people and businesses, particularly to states offering greater economic freedom, is real evidence that California’s economic environment has become, for many, too burdensome, and this evidence cannot simply be dismissed. The verdict of departure deserves to be taken seriously, even by those who would defend the policies that prompted it.

The deeper question the exodus raises is whether the benefits of California’s policies, the public goods they fund, the values they express, justify the costs they impose, costs that have prompted significant numbers to leave. This is a genuine question, on which reasonable people may disagree, but it is a question that the exodus forces, a question that the verdict of departure makes unavoidable.

Heeding the Verdict

The California exodus is an economic verdict, rendered by those who have chosen to leave, on the state’s high taxes, heavy regulation, and elevated costs. Whether or not one accepts the verdict, it deserves to be heeded, for it reveals the real costs that the state’s policies impose and the real responsiveness of people and businesses to the economic environment. A state that ignores this verdict, that dismisses the departure of its residents and businesses, does so at its peril.

This publication has argued across our network, including in related commentary at The London Prat, that the migration of people and businesses in response to the economic environment represents a meaningful verdict on economic policy, a verdict that policymakers ignore at their peril.

The exodus is a verdict on taxes and regulation; wise policy heeds it. For further reading on state economic competitiveness, consult research from the Cato Institute, and additional network commentary at The London Prat.

SOURCE: https://bohiney.com/