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California Is Minting Millionaires While Its Population Declines

California Is Minting Millionaires While Its Population Declines

California Gov. Gavin Newsom speaks in Los Angeles on Jan. 3, 2024. (John Fredricks/The Epoch Times)

Travis Gillmore

Travis Gillmore

3/30/2024

Updated: 4/2/2024

While the state’s population is on the decline, the number of millionaires in California is increasing, according to the most recent data covering 2021 released by the IRS and the state’s Finance Department.
Approximately 400,000 fewer tax returns were filed in 2021 than the year before, but total tax revenues collected jumped by about 20 percent to a record high of more than $125 billion.
About 116,000 residents became millionaires between 2019 and 2021, and trends reveal a growing gap between the lowest and highest earners, with the number of Californians earning more than $50 million per year spiking by 158 percent during the same period, California Gov. Gavin Newsom’s office told The Epoch Times.
However, the Finance Department’s annual personal income tax report covering 2021 paints a vastly different picture. The governor’s data show 288,098 taxpayers earning at least $1 million during the year, while the finance department lists 158,444 such earners.
The Epoch Times requested clarification and source material from the governor’s office, but no response was received by press time.
Los Angeles and the Bay Area ranked near the top of regions around the world with the most millionaires—tallying 205,000 and 285,000, respectively—according to Credit Suisse’s Global Wealth Report from 2022.
The Golden State has the most millionaires of any state totaling 1.14 million in 2020, with Texas’s approximately 650,000 placing second. Per capita, California ranks seventh nationwide at about 8.5 percent of the population worth at least $1 million.
Given the state’s financial dilemma—a budget shortfall of between $38 billion and $73 billion as estimated by the governor’s office and the nonpartisan Legislative Analyst’s Office, respectively— some experts are suggesting that a loss of businesses and taxpayers is contributing to the deficit.
About 350 large companies moved their headquarters out of the state from 2018–21, according to research by the Hoover Institution at Stanford University.
“The state, from the governor to the Legislature, needs to stop looking at the business community and the successful people in it as the main ‘pocket to pick’ to fund the state,” Marshall Toplansky, a business professor at Chapman University, told The Epoch Times. “If they do not, the business community will continue to vote with its feet and leave.”
He said legislators need to prioritize reducing regulations that are stifling business development and driving some companies out of California.
“To my mind, we need a massive simplification of the tax and regulatory system,” Mr. Toplansky said. “We need to make it easier for companies to do business here, so they have an incentive to keep people here.”
Pointing to a 2022 study by the Mercatus Institute, a research institute at Virginia-based George Mason University, that found California to have the most regulations of any state—nearly 400,000 described by more than 21 million words—he said their complexity is too burdensome for some businesses and industries to comply with.
“If we drive down the cost of regulation, especially in the environmental compliance area, and limit the endless legal challenges virtually every business expansion project has to deal with, we can not only drive down the cost of doing business but also the cost of housing, which is heavily encumbered by regulatory costs,” Mr. Toplansky said.
Housing values play a significant role in wealth generation in the state—with median home prices topping the nation nearing $800,000, according to online real estate company Redfin.
However, business leaders and economists point to high home prices and cost of living as factors driving some residents out of the state seeking more affordable housing and fewer taxes.
Chapman University in Orange, Calif., on Oct. 14, 2020. (John Fredricks/The Epoch Times)

Chapman University in Orange, Calif., on Oct. 14, 2020. (John Fredricks/The Epoch Times)

A 2022 study conducted by Chapman University, located in Orange County, analyzing the sentiment of CEOs across the state found a significant amount of discontent, with 63 percent of respondents giving California a ranking of one or two on a scale of five. Half of those surveyed said they are contemplating moving out of the state, and one-third said they already have plans in place to migrate.
“Our research with CEOs indicates that they are very frustrated with doing business in the state,” Mr. Toplansky said. “Think about the impact of losing the higher income executives from those large corporations to other states.”
While the focus on millionaires and billionaires is relevant given the state’s progressive tax structure, a loss of residents in recent years at lower ends of the income scale is impacting budgets, according to experts.
Faced with a declining population and tax revenues that fail to meet expectations, the governor told The Epoch Times in January that he rejected the notion that an exodus is affecting the state’s finances.
However, some said Mr. Newsom is missing the mark.
“I think the governor is ignoring the reality of his own financial data,” Mr. Toplansky said.
Median family income in 2021 dipped by 3.3 percent to $84,230 in California—nationally the average fell by 2.3 percent to $74,213—compared with the previous year, according to IRS data.
With higher-earning residents increasing their wealth while some other workers struggle to make ends meet, the polarization of wealth is diminishing the middle class, according to experts.
Jim Doti, Chapman University president emeritus and head of the Gary Anderson Center for Economic Forecasting, told The Epoch Times that a loss of upper-middle-class earners is affecting the state’s finances.
In 2021, approximately 69 percent of all tax revenue lost in the state was from workers earning at least $200,000 per year that moved to other states or nations. In the decade starting in 2011, the state saw the number of such earners fleeing increase by approximately 2,600 percent, according to Mr. Doti.
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Travis Gillmore

Travis Gillmore

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Travis Gillmore is an avid reader and journalism connoisseur based in California covering finance, politics, the State Capitol, and breaking news for The Epoch Times.

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