Could California Flame Out?

High housing costs & taxes lead to this: “Once we decided we had to get our employees out of California, we went about our search systematically.”

By John E. McNellis, Principal at McNellis Partners, for The Registry:

The phone rang early the other day. “Well, our center’s still standing,” my partner said. “The fire’s only a couple blocks from us, the whole town of Lakeport’s been evacuated. I think we’ll be ok, but it’s out of control.”

That fire is still raging as of this writing, the town is empty, the stores are closed, our shopkeepers are suffering daily losses that, while nothing compared to the loss of life and home that California’s wildfires are claiming, will never be recovered.

Not so very long ago I thought that global warming was a tragedy of epic proportions, but that it would have at least a few winners: Southern California might become truly unbearable, but Eureka would be the next Laguna Beach. I was wrong again. Writing in the New York Times about Montana, Sara Vowell summarized it like this, “Here in the Mountain West, there are no longer four seasons, only two: winter and wildfire.”

While not that apocalyptic, California’s wildfire season has been starting earlier and ending later. In the past, the season lasted a couple months, August through early October. This year it began the first week of July and last year–the deadliest and costliest wildfire season ever–it went on forever, finally petering out in the north in November and still devastating the south as late as December. The Thomas fire in Southern California, the largest single fire ever, broke out on December 4th.

In California, we pay the highest taxes in America. No other state has a base sales tax as high as our 7.25% nor does any state match our top marginal income tax rate of 13.3% (Hawaii’s a distant second at 11%). One resigned pundit called it a “Shangri-La tax,” the price we must pay to live in the Golden State. And thanks to what passes for political brilliance in Congress, Shangri-La became way more expensive as of January 1st when the Republicans eliminated the deductibility of state income taxes at the federal level, smacking the high-tax Democratic states they already had no chance of winning. All things being equal (they never are), a rich liberal will pay another 6.5% or so in federal taxes for the privilege of living in California this year.

Thus far, the vast majority of us are staying put, tax increases notwithstanding. According to the Legislative Analyst’s Office, the California Legislature’s non-partisan fiscal advisor, California lost about a million residents to other states from 2007 to 2016 (5 million in, 6 million out), a low population loss by historic standards. Of interest – and not surprising given our cost of living – the out-migration was greatest among the least educated. In contrast, the state had net positive in-migration among the affluent ($110,000 plus annual incomes) and those with graduate school levels of education.

This net-outflow was met by a larger inflow of people from other countries, particularly Asian countries. And in total so far, the population of California has kept growing – reaching nearly 40 million.

These migratory patterns are consistent with the notion of the state as a wickedly expensive Shangri-La. But what happens if the state loses that allure? What happens when the highly educated affluent decide that California is more akin to Pakistan than paradise? Or that its beaches and Sierra Nevada sunsets are no longer worth its housing costs and congestion?

I asked Ken Fisher about his decision to relocate his company Fisher Investments, a financial advisory firm with a $100-billion portfolio, out of California.

“How did you happen to choose Camas, Washington for your new headquarters?”

“Once we decided we had to get our employees out of California, we went about our search systematically. We wanted them to get the maximum value from their income and, at the same time, live in a pleasant town with good schools. We chose Washington because it has no state income tax. Then we focused on Camas because it is a small, affordable town with a terrific school system; its graduating seniors are at the top nationwide with their SAT scores. And the town is just across the Columbia River from Portland. This was important because we need close proximity to a first-rate airport and Portland International is among the best in the country. There’s another benefit to Camas. Oregon has no sales tax which means Camas residents can hop across the river to do their major shopping at a significant discount.”

I came away thinking Fisher is not on the Forbes 400 list by accident and wondering whether Fisher Investments would prove another outlier in what thus far has been a trickle of corporate departures from California or become the lead steer in a growing exodus. To that point, I noted that Fisher’s latest book (he’s written 11) is Beat the Crowd: How You Can Out-Invest the Herd by Thinking Differently. He certainly beat the herd out of California.

California isn’t going to solve global warming, but if it wants to retain its affluent and educated, it just might consider lowering taxes, putting its infrastructure dollars into something other than a bullet train to nowhere, and seriously attempting to make its housing more affordable. More specifically, California and its municipalities need to allow far greater residential density near transportation centers and encourage multi-family housing everywhere in the state. By John E. McNellis, author of Making It in Real Estate: Starting Out as a Developer. A version of this article was first published on The Registry.

Uber’s fleet of autonomous cars thus far has gone the way of the Spanish Armada, producing nothing but grief. Read…  What Future Is Uber Seeing for Itself?

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  112 comments for “Could California Flame Out?

  1. Ron says:

    Building a vast network of homes and. business in the heavy forest areas of the State is the problem and has been creating fire issues for some time. The idea that these homes and business structures can be protected has become more and more expensive as wild fires easily move into various home tracts that were built primarily to serve as white flight neighborhoods. Most of these areas cater to long commuters many spending hours on the road as they leave early for work and come home late. They purchased these homes and property to escape the high cost of homes within the urban belt but its a bet that is not working out. Business that operates in such communities is mostly tourist driven such as Lakeport and are high undesirable locations. The entire stretch of Northern Calif from Sac North and most of the Sierra area is overly populated with endless subdivisions approved by Counties searching for property tax but they are fire traps and will always be so. This has nothing to do with high state taxes rather extremely poor choices made by people thinking they could live in once remote areas and have a better life.

    • Govinda says:

      You don’t know what you’re talking about. Redding isn’t heavily forested. Neither is any place in SoCal that burns regularly. It’s too many people competing for an ever dwindling resource base, particularly water but everything else as well. And beyond corrupt, idiotic leaders at every turn. So glad I left years ago. Taking a vacation in a few days and NOT going there, tired of the perpetual crises. Heading north.

      • Ron says:

        Your fantasy that Redding isn’t heavily forested just another urban area is false along with your claim about Souther Calif. San Diego is a good example of an urban area that has extended into the deep Brush that that has burned for hundreds of years but now they adde subdivisions.
        This tidbit about Redding from its internet site:

        “With mountains all around, miles of hiking and biking trails, a river running through it, and national parks nearby, Redding is an outdoor paradise for young and old alike. Cradled by Mount Shasta and Mount Lassen, Redding has 300+ sunny days per year. It’s a great place to escape the chill of spring and the gray days of winter, too! Redding is home to the famous Sundial Bridge, world-class fishing, and 200 miles of hiking and biking trails for all abilities. Head out on a day-trip to see the bubbling mud pots and boiling lakes in Lassen Volcanic National Park, or get refreshed by the waterfall at McArthur-Burney Falls Memorial State Park. This 129-foot gusher is considered one of the most beautiful in the state. Also, be sure to find out what fun events are happening— like the Redding Marathon, Kool April Nites, Shasta Lemurian Classic, Give Me Wings Century ride (one of the most challenging in CA!) and the Salmon Festival (Forbes ranks Redding as the only West Coast city among the Top 10 fishing destinations in North America). Redding is a perfect vacation, destination for “Any Adventure, Any Day!”

      • RangerOne says:

        Water could still in theory be fixed with good desliniaztion. Not sure if it’s just cost that’s holding that up. But the state is all but doomed without it.

        • Nat says:

          Desalinization is very expensive because it is very energy intensive. Desalinization can help with water issues, but it isn’t a silver bullet, it just requires so much energy that no mater what future you imagine desalinization’s part in it can only be so much.

          What would be the most useful in Cali is reduction of waste. Things like:

          1. Require all the wineries to dry-farm: (technically it makes their products better too, and their is less volume of “California grapes” so they can raise prices to offset the difference in lower bottles.)

          2. For both individuals and companies, create some very steeply increasing “brackets” for water cost based on use. For example, the lowest bracket for individuals might have current prices, but would only accommodate families using their showers (reasonably), toilets, and drinking. Meanwhile families with extensive lawns, plantings, swimming pools, high-flush toilets, etc… would find themselves in a much higher bracket where the per gallon cost of water is much much higher. This should encourage water-saving measures at the individual level, and will raise more money that can be used to help invest in public water producing, storing, saving, and reprocessing infrastructure.

          3. Add a second pass “gray-water” system. In such a system water that has made a first pass through things like the faucet and the shower, can be returned to be used a second time for the toilet or watering the lawn. The initial investment is colossally expensive, but it makes a huge difference over time, and the water savings are significant – it can approach a full 50% reduction without people changing any of their habits.


          But yes adding desalination to that would be useful, its just that the cost-per-gallon of water from desalination alone isn’t worth it without making each gallon go as far as possible first.

        • BridgetownBeast says:

          Desalination is not the silver bullet people seem to think it is. It’s incredibly energy-intensive, no matter what process is used. We’re having water shortages driven by massive overconsumption and climate change and using mind-bogglingly huge quantities of fossil fuels to purify water will only exacerbate that. There are passive water collection technologies that could help but at the end of the day the only real solution is to scale back consumption.

          Not to mention that water produced by R.O. is pretty unpalatable.

        • Bill says:

          There’s an easier solution – cut back on animal agriculture.
          5% of water consumed in the US is by private homes. 55% of water consumed in the US is for animal agriculture. Animal Agriculture is responsible for 20%-33% of all fresh water consumption in the world today. Californians use 1500 gallons of water per person per day. Close to half is associated with meat and dairy products.

        • Thor's Hammer says:

          Our child-President has already solved California’s fire problem via an evening of Tweeting. He plans to outlaw rivers and use all the water saved to build new Trump Towers everywhere there is a corrupt building department.

        • Jon says:

          Bill hit the nail on the head.

          ANIMAL AGRICULTURE is the problem.

          Watch Cowspiracy.

          Stop eating meat and dairy.

          You are the problem and you are destroying the planet.

        • Lion says:

          Too many homes in SoCal keeping their lawns green with Northern California water.

      • Brian M says:

        No. Redding is certainly heavily forested. Pines and oaks. At a minimum, those steep canyons are heavy chaparral country. I have spent hours cycling through the very areas burning now.

        Throw in the fact that Redding is extremely hot during the summer (110 degrees for days, if not weeks at a time) and yes, there is a fire situation.

        Agree with the “too many people” argument, but the way these too many people choose to live and build is a big part of the problem. Low density faux-rural subdivisions along two lane roads with one way in and one way out.

    • Suzie Alcatrez says:

      Can’t someone invent a fireproof house?

      They seem to have them in Manhattan.

      • Kilfford says:

        Creative types have rigged up lawn sprinkler systems on top of and on sides of houses and turn them on when fire is near. Long as you have water, it’s golden. Works.

      • Frederick says:

        Building 7 sure wasn’t fireproof According to some anyway

      • kevin moore says:

        Read the latest Harpers. The feature article is about fire in California and in Portugal. In some cases people in living in Portugal actually are safer in their homes during forest fires than trying to escape them. Their homes are made of stone.

      • Kilfford says:

        Also, if there is anything to these wild and crazy theories, nothing may work:
        Rebecca Campbell: Directed Energy Weapons = Forest Fires That Cut Houses in Half, Do Not Burn Trees

      • Gus says:

        California has allot of cool construction tricks that help their homes be fire resistant and it defiantly helps in urban fires. Unfortunately wild fires have to major hurdels. First is the burn time befor the fire department can even reach the house. Secondly is the heat of the fire. Socal is designed to burn heck there are plants there that only germinate through fire but instead of letting the natural flash fires burn the underbrush, we fight to extinguish them. This allows allot of kindling to build up which causes exstream temreratures. I remember watching the ceder fires in sd and was able to see the flames from 3 miles away! The fire got so hot it burnt the roots out of trees. So heat and time both factor major roles in how fire proof a house is and both of these play against Californians.

  2. Thomas Molitor says:

    California is probably the worst state in the union to live in. It is perhaps the most beautiful state, but from a governmental perspective, California is out of control. Residents are the highest taxed in the nation and taxes have matched insane European levels.

    What’s more, it’s hard to see how real estate can survive there for the state is desperate for money. The chances of economic reform are DEAD in the water to any real extent. They are now hunting people who moved to Florida after “earning” their pension while living in California.
    The computer field is the last great asset the state has and that is beginning to migrate out of California. It is one state you definitely do not want to do an IPO in these days. Because of the heavy burden of a mismanaged state government, the trend is to exit California like it is in New Jersey. It is not a tax-friendly state and it will only get worse.

    Today, California is in the top-10 states where companies are leaving. Many are headed to Texas. I would not expect real estate to hold its value when taxes are driving people out. With a State Income Tax at over 13%, the highest in the nation, you have to be insane to keep a business in California. They once said, “Look West, my boy.” Guess they should now say look South East.

    Then there’s CalPERS unfunded pension liabilities. Stanford University has been tracking the cost of pensions in California. So while there is a movement starting to separate from the United States especially since they wanted Hillary, California will soon fall on its face and then will be begging Washington for a handout. The real amount owed by every household in California to cover state pensions jumped to $93,000 in 2015 up from $77,700 per household in 2014.

    CalPERS, the biggest public employee pension system, saw its unfunded liability grow $27.3 billion to $138.6 billion in the fiscal year ended June 30, 2016, according to the annual financial report posted on its website.

    The data lags a year, marking the end of a 12-month period in which the $344.4 billion system had a 0.61 percent investment return compared with the 11.2 percent return for the fiscal year ended June 30, 2017. CalPERS officials have estimated the system is 68 percent funded as of June 30, a drop from 68.3 percent a year earlier and 73.1 percent at the end of the 2015 fiscal year.

    My advice? Short California.

    • NoEasyDay says:

      @Thomas Molitor-
      There’s a Wall Street Journal story about how pension funds are in crisis. There’s not a single mention of the fact that the fed’s zero-interest-rate policies are the reason why the pensions are in distress. All retirees and long-term savers, life insurance, they’re all in the same boat.

  3. Bobber says:

    California is the land of opportunity for anybody in the tech business with significant equity. Everybody else is overworked and underpaid in California relative to the cost of living. I get recruiters from California calling me all the time. It’s a quick conversation that starts and ends with “not interested”.

    • illumined says:

      Ah, but the tech industry is in a giant bubble right now. In fact California’s economy largely seems to just be two things, a tech bubble and a real estate bubble. Both of which are bigger than anything we’ve ever seen in this country. The real question is what happens when those bubbles finally burst?

      • interesting says:

        “The real question is what happens when those bubbles finally burst?”

        a really really big earthquake

        • barefoot charley says:

          What’s hard to imagine is that California’s more than a bubble economy–it’s a bubble culture. Bubble’s are great! Opportunity! Bubbles busting are no worse than an occasional earthquake, or wildfire. There’s insurance, there’s new opportunity. I don’t mean to be facetious here. Coming from the stable, sensible Midwest, it took me years to figure out that the gold rush stamped California’s character, no matter how many sensible men went back to the Midwest. Booms and busts are what we talk about, like Midwesterners talk about the weather. In our lifetimes California will have more booms and busts, and yes, oligarchs and attentive bystanders will still do well.

    • Dan says:

      Good God yes..

      I work outside DC and live in central VA just off the Shenandoah National Park.

      Every day, and I mean EVERY DAY, I get emails or calls from recruiters to go work in CA somewhere. Every day I say absolutely no way.

      To keep my current lifestyle I would need to earn 3 times what I make now and from all I can see of life there, and I have been out to Silicon Valley a few times, SanDiego each year for work at the Naval Base, the life there is a form of hell. Too congested. Too dirty. Too expensive. Too complicated.

      I bought my 2,700 sq/ft home with 10 acres of trees and a stream for $400k. I telework 3 days a week and sit on my porch looking at the surrounding farms. The other two days I am up near DC or in the city but for two days a week i can suck it up.

      These recruiters always seem shocked that I would not be willing to take a 50% increase in pay for the “opportunity” to work in Silicon Valley.

  4. Anthony Aluknavich says:

    Please don’t tell people leaving California about Texas. We like it just the way it is with no state income tax and affordable housing.

    • Bobber says:

      Texas may be voting Blue in the not too distant future. Lots of people from big cities are moving there.

      • Modalita says:

        And then they try to turn their new states into the place they left behind. You’d think they would have learned the first time.

      • Escierto says:

        All the future voters of Texas are already alive and they are not white Anglos. By 2030 white Anglos will be only one third of the electorate. The old white men running the state of Texas now will soon be the last of their breed.

  5. George McDuffee says:

    And thanks to what passes for political brilliance in Congress, Shangri-La became way more expensive as of January 1st when the Republicans eliminated the deductibility of state income taxes at the federal level, smacking the high-tax Democratic states they already had no chance of winning.

    First, the SALT (state and local taxes} deduction was *NOT* eliminated, it was capped at 10.000U$.

    Second, Why should the people who live in low SALT states continue to subsidize the people who chose to live in high SALT states such as NY, California, and Illinois. through the continued unlimited SALT deductability?

    • Frederick says:

      George McDuffee I agree they shouldn’t

    • Bookdoc says:

      I agree 100%. Why should we subsidize these states that tax and waste.

    • 2banana says:

      Liberals and progressives demanded that the rich pay their fair share.

      Now liberals and progressives politicians demand protection for their rich state citizens and are setting up scam charities to get around this deduction cap.

      God bless DJT for forcing the hypocrisy into the sunshine.

      • Corbin Dallas says:

        I’m amazed you still actually believe DJT can understand tax reform, let alone eat his own food… I guess the BSE does do wonders some time.

    • Matt P says:

      Except those states were actually subsidizing all the other states when you look at net tax inflow/outflow. The low tax red-state paradises receive the highest subsidies from the rich blue states.

      • quillan says:

        Correct. It is amazing that otherwise intelligent people don’t understand this, or pretend not to. Other than Texas, almost all of the red states are welfare states. They are subsidized by the much more productive people in the high-tax places like California, Minnesota, New York, and Massachusetts. Without federal subsidies, places like Arkansas, Wyoming, Alaska, and Arizona would cease to exist almost immediately. No road or airport subsidies, no energy subsidies, no free use of federal lands, no crop subsidies, etc. The people who scream loudest about socialism are the biggest socialists. I often wonder why their heads don’t explode from all the cognitive dissonance.

    • saylor says:

      16…that is how many states contribute more to the Federal Government than they receive back in aid.
      California is one of those 16 states.
      Who is subsidizing whom?
      Get some facts.

  6. Ron says:

    Here is an Article about moving out of Calif. The big surprise is that high income folks are replacing the lower income families moving to states like Texas.

    • Wolf Richter says:

      This is what John McNellis, author of this article here said in paragraph 6 above:

      “Of interest – and not surprising given our cost of living – the out-migration was greatest among the least educated. In contrast, the state had net positive in-migration among the affluent ($110,000 plus annual incomes) and those with graduate school levels of education.”

      • Andy says:

        Then who’s going to roll up their sleeves to do the menial but necessary jobs. You can’t pay a worker at McDonalds 100K/year and expect the cost of the burger to remain under $5.

        I live in Berkeley and min wage is going up to $15 on 10/1/18, a raise from 13.75. Fifteen dollars is less than half of what is needed to make a livable wage.

        Are consumers willing to accept the increases in labor into their end prices? It will just cause the next tier of earners to leave the state as well.

        • Roadster says:

          You must have never looked behind the counter at your local California eatery. I don’t think the standard minimum wage fits into the picture.

          There is an endless supply of folks south of the border who would find even $5/ hr a luxury wage and gladly sleep in their cars or in tents to get it.

          Wolf noted that on the auto assembly lines in Mexico a skilled laborer makes abour $2.50/ hour.

          Now, if you actually enforced the immigration laws, then you would see many restaurants vanish for the simple fact there are an obscene excess of fast food joints. They exist because of slave labor, nothing more.

          I wonder if in the 1950s there were twenty five burger kings per square mile in Kansas?

        • Frederick says:

          Roadster You are spot on Illegal immigration has totally trashed low skilled job opportunities for native Americans And where I live they live 20 to 25 to a small ranch house And normally overwhelm the septic system and trash the place And that’s the TRUTH if any of you left coasters can handle that

        • safe as milk says:

          this is the flip side of the argument that i have with all my open borders friends here in new york. yes, there will be fewer jobs if we raise wages and prices will go up. this is necessary to create a healthy labor market. i’m all for it.

        • Edwin says:

          I love the comments on this thread…Complaining about higher taxes but would welcome higher food prices and such if we could close the border. Slave labor they say. Would you people stop buying produce and meat at the grocery store and stop going to restaurants please. Stop going to the car wash and mow your own freaking lawn. While you are at it, stop buying cheap products from China and throw away your stupid Iphone. Do that or stop complaining.

        • Thomas Molitor says:

          “needed to make a livable wage.”

          Minimum wage laws are unemployment drivers robbing under skilled workers the opportunity to acquire work experience and move up the ladder. Fast food jobs (especially in CA) are not “livable wages.” My first job at a fast food restaurant was $1.25 an hour. I lived at home and saved for college. Even $15 in Berkeley is far from a *livable wage*. The rents are astronomical and the state/county/city sales tax = 9.1 percent. That alone is a regressive tax.

        • Lion says:

          Agree with Thomas, being of the older group I think of the jobs I had as a teen in the 60’s. Mowed lawns with a push mower, towed it behind my bike. Worked in a printer shop for 40 cents an hour (which was minimum wage for a kid). Had a paper route at 13, taught me a bit about running a small business. Delivery pizza and chicken by motorcycle while in HS. Stoners were my best tippers. And I didn’t have to compete with adults for these jobs. Sadly to me, these types of jobs don’t exist anymore.

    • Patience says:

      It’s called communism or the feudal system. The people closest to the money printing machine want California.

      What would be happening in an honest monetary system?

  7. Paulo says:

    Interesting to read the complaints about taxes. People want Govt. to perform certain services, but don’t want to pay for it. If you want a decent education system, highways, airports, medical system, it takes taxes. There are some efforts more readily attained with a collective (warning….ouch word…collective) effort.

    While I applaud rugged individualism, even the simple living Amish get together to build a new barn. Instead of moving to no-tax Texas, just do what Paul Mannefort did and hide your money overseas. :-) Without taxation it is not possible to get a decent public school system that works for all citizens. As I understand WA education funding, it is all local. Therefore, rich counties have great schools while poor counties have terrible schools. How is this good for any country? It further stratifies society and emphasises haves and have nots (otherwise known as income inequality). It also helps stultify any chance of upward mobility for lower income citizens.

    I get it that California is seen by many as a good place to leave. Hey, my parents left there in ’68. But when they arrived in ’55, poor as church mice, it was (as my mom used to say) the Promised Land. So what changed? In our case it was the riots and war protests. Whole neighbourhoods were under seige, just 20 miles away. The income tax rates seem pretty low from where I sit. I would think the high price of housing and medical costs would be more of an incentive to leave.

    regards, and no criticism intended or implied.

    • alex in san jose AKA digital Detroit says:

      Paulo as always you’re a breath of fresh air.

      I’ve lived in California, Hawaii, and flyover. Hawaii’s been the cheapest at least on the island of Oahu because I lived in the parts that were planned before the automobile so I had those late-1800s to early 1900s things: Rooming houses, walkable areas, the bus (would have been a horse-drawn omnibus back in the day, then streetcars on rails; for me it was an auto-bus but they’re bringing back a light rail system).

      Sales (“excise”) tax there is 4%. Always has been, always will be. And they will not tax your banana (food).

      In California sales tax is never over 10%, and they won’t tax your banana.

      In flyover, sales tax, depending on town, can be over 13% and they will tax your banana.

      Rents seem to be about the same everywhere that there are jobs at all. That $1300 a month studio apartment in California is also a $1300 a month apartment in Phoenix, Northern Arizona, Colorado, or New Orleans. I remember leaving AZ to get back to sanity/California and some young people I knew who worked at a local car dealership moved also. I know they’d been talking about it but imagine my surprise meeting them in Costa Mesa. “Moving here has made the money work out like we’re working the same jobs but getting rent for free!” they told me. In other words they got paid enough more that it worked out noticeably better for them here. Of course it did.

      I agree war protests can be annoying. In flyover, War Is Good and you’ll never see a war protest there.

      All in all, I wish I’d known in my youth what i know now and left for France. For one of many things, school is managed at the Federal level, so you don’t have poor areas having crappy schools and rich areas having good ones. There’s a Federal standard and Federal allocation of funds and kids get much more of an even chance in life.

      • Wolf Richter says:

        alex in san jose AKA digital Detroit, you said: “All in all, I wish I’d known in my youth what i know now and left for France. For one of many things, school is managed at the Federal level, so you don’t have poor areas having crappy schools and rich areas having good ones.”

        LOL. Ask the folks in the northern suburbs of Paris or in certain parts of Marseilles or Lyon (lousy schools, with almost no chance of getting into elite universities and little chance of getting into decent universities) — just to name a few that I know. France’s education system is stunningly elitist, including by geography.

  8. Setarcos says:

    If someone can work in a state with taxes at 1/2 that rate (or less) and at the same wage, what would motivate them to stay …. Inertia? The weather is nice, but what else do you get for the premium?

    • Ron says:

      This article on fire danger, and high taxes in calif the writer discussed Ken Fisher investments and why they moved to Camas Wa. One reason he did not mention for the move was the low coast of living in Camas and therefore less need to pay higher wages to his workers the other unmentioned the demographics of Camas Wa vs San Francisco Bay Area:

      Camas, WA is 85.1% White, 5.66% Asian, and 4.69% Hisp

      White flight is a key component of Whites leaving inner urban Calif areas and moving into more rural parts of the state and a component of the out of state flow.

      Just a reminder on how important Calif economy is to the U.S.

      “California’s economy is now the 5th-biggest in the world, and has overtaken the United Kingdom. New economic data puts the California economy at $2.747 trillion — bigger than most nations. The ranking puts in fifth in the world, just ahead of the United Kingdom, which is on $2.625 trillion.May 5, 2018”

      • No Free Lunch says:

        It is not total GDP that counts, but GDP per capita. In other words, what is your share? CA is #9 for GDP per capita. #7 is ND (all that oil production, and so few people).

      • Bad Seed says:

        Aren’t other states bordering central/southern California asking to renegotiate the Colorado river water compact that allocates water per state? They want more river water than they receive now. Water shortages in the near future will be a permanent problem for California. As mentioned desalination is expensive.

    • Wolf Richter says:

      Higher wages?

  9. polecat says:

    I remember back around 1980, or there abouts, noticing how CalTrans was installing times merge signal lights on many freeway onramps, especially .. but not only, I-50 approaching the transtion to Hwy 99 and I-80. At the time, I just chuckled, shaking my head and woundering WTF ! why the need for such ‘improvements’, when the traffic seemed not to warrant their use. Fast-track to 2004, I was no longer amused, deciding that the state was racing towards ‘favelaville’, and decided to bale!
    But for others, hope floats in the enchanted isle of Califa ..
    All I can muster to anyone wanting to stay is ‘lotsaluck’ .. your gonba need it !

  10. Califuy says:

    But the population continues to grow….

    More people live there every year is an undisputed fact.

    …. this is a ‘nothing burger story…

    California’s state population will continue to grow for decades to come regardless of income tax. Which is around 8% for most earners. 13.3% is only assess for folks that make over $500k/year

    • Nicko says:

      The is the only point that matters. As long as more people continue to move there, California will prosper.

  11. MarkinSF says:

    Camas WA – Median list price $560k. Not cheap

    • Ron says:

      Relative to SF Bay Area RE prices its very affordable and they have a large pool of homes on the market, currently 243 homes for sale within a city of 20K or 15 Sq miles.
      Compared to Pleasant Hills Calif with a population of 35K we have 28 homes on the market. Compared to Pinole near Berkeley with a population of 20K they have 32 homes for sale.

      Easy to buy a home in Camas a longer wait to find a buyer if you want to move on maybe several years.

    • Frederick says:

      They should move to Eastern shore area of NC nice 3 BR homes can be had for under 200K Low taxes good weather Near the Outer Banks if surfing is your thing

  12. GregN says:

    California is very much like a corporate annual performance review. If you’re at the bottom 10% of acheivment and success you get a pink slip and eventually need to seek a new state to live in.

    Meanwhile every year there’s a new crop of willing foreigners and out-of-state college grads and eager bounty hunters that come in to replace the recent departures. The new “auditioners” spend a few years toiling in the insanity hoping for a lottery ticket for citizenship, the rest go home or to Nevada.

    There’s always more people that want to live in a California than want to leave. Just come visit in January and February and you quickly understand why it will always be a desirable place to live and work – inspite of the cost.

    The only phenomenon that could cause a mass exodus would be nuclear war with China / Russia / NK. That’s when the west coast will loose its popularity.

    • michael says:

      or perhaps a depression. Think of 2007 as a warm up.

      • Frederick says:

        A depression is just what we need sadly to bring an end to the insanity that is California real estate Tic too MFers

    • DV says:

      I always wondered how people can live in places where temperatures of 30 degrees Centigrate last for longer than three months. What is the air conditioning cost?

      • bemused says:

        We have a house in Inverness, Florida, about hour north of Tampa. Temps are over 30C (86F) from May through Sept almost every day. Our electric bill runs from $130 mo dead of winter (very little heating or airco) to $200 mid-summer. I would guess $80/mo or thereabouts for airco. We do have several freezers/refrigerators, electric water heater (in the US most houses have 40 gallon or so tanks of water that are kept heated all of the time), clothes dryer, electric kitchen, so we have a reasonably high base load. We have about a 2000 sq ft house with 8 ft ceilings. I did put extra attic insulation in when I moved in. By comparison, our last house near Tampa was 3000 sq ft with 10 ft ceilings. Power bills would often top $500/mo in the summer, and that was with a new high-efficiency airco unit. So the real answer is, “it depends on the house”.

    • RagnarD says:

      It is beautiful
      Except or even
      I’m not sure which
      It’s on fire

      But definitely not when viewed from highways on which one feels like a rat in a concerte sewer drain.

      A place in which many spend large quantities of their not so free time

  13. TropicalSunset says:

    CA is a very dysfunctional place. It is really a state full of a lot of poor people, that also happens to also have some “islands of extreme wealth” (Palo Alto, La Jolla, Newport Beach, etc..). But a lot of the state is really poor. Ever been to Stockton? Bakersfield? San Bernardino? Watsonville? Much of interior LA?

    People think of CA they think of Hollywood and Silicon Valley, but there is a HUGE disparity of wealth in the state. And crazy high housing costs and high taxes make it very tough for young folks who don’t live at home to ever get ahead.

    LA for example has a median income of only $51k! And the median home price is $609k! Omaha Nebraska has a median income of $50k and a median home price of $168k. Let me repeat that, LA has a the same median income as Omaha! People think folks in CA have a lot of money, but most DO NOT.

    When I lived in SoCal years back I was struck by the amount of poverty that surrounds those cities. People who spend most of their time in Del Mar or Newport Beach don’t see it. But driving around LA and SD, I was amazed how poor huge chunks of it are.

    The of course you have the endless droughts and wildfires.

    • jason atkins says:

      I used to date a girl who lived in Fresno, I was living in Alameda at the time, what a depressing drive/area. Much of the interior is absolutely dirt poor, what an eye opener.

      • sierra7 says:

        California is a huge agricultural state; and, that huge part of Cal economy pay some of the lowest wages. The dichotomy between the agricultural cities, towns, areas, vs/vs the incredibly “wealthy” areas such as Silicon Valley (Greater Bay Area) is astounding.

  14. Bernadette says:

    Wonderful thread. Wolf, you wound your fans up! Growling at California’s chaos!

    Adding to this thread on fire — there is no mention that California’s Pacific Gas & Electric is considering to file ‘bankruptcy’ due to the payouts from lawsuits from 20 years ago to most recent lawsuit filings. (I have an inside storyteller) Thus the reason behind Governor Brown’s approval of Solar Panels for every home. (see links below)

    Also, as of today, the Mendocino County fire continues. I suspect arson from the might Monsanto-Bayer who publicly announced their intent to be involved in the cannabis industry. (see link below)

    • Frederick says:

      Ahh those darn potheads And I thought it was the Russians

    • Wisdom Seeker says:

      Bernadette – a few clarifications:

      Per your link, a PG&E bankruptcy would be due to liabilities from the 2017 wildfires which its equipment reportedly caused, not due to events from “20 years ago”. PG&E already went bankrupt in the early 2000s, so older liabilities should have been cleared from the books.

      Now, if in fact PG&E failed to maintain adequate clearance around their power lines and perform other required maintenance for safety, they will have amply earned their bankruptcy, given the damage they caused. But the courts will decide that.

      However, a PG&E bankruptcy would not prevent ongoing operation of the electric power grid, and thus is unrelated to whether newly constructed homes should be required to come with solar panels. Also, annual new home construction is a minute fraction of the installed housing base, so the impact on electric demand & supply would be small for many years to come. It would, however, relieve PG&E and the other utilities of the need to invest as much in new production capability, since new residential demand would be largely covered by the new solar panels, at least when the sun shines.

      The question of how far an agriculture megacorp like Monsanto-Bayer would go to dominate an industry is actually very interesting, though! There was outright violence and gun battles over land use in the mountain west states in the late 1800s, between farmers and ranchers and so on, with financial backing and probably a fair share of criminals supplied by the Eastern Establishment leading to the ranchers’ victory. Then the railroads provided tasty steaks to New York tables…

      As for me, Monsanto-Bayer is high on the “never buy these stocks in any mutual fund” list. Very hard to find suitable funds though. And unfortunately those with pensions most certainly own part of the problem whether they know it or not.

  15. James McFadden says:

    Please take your companies and locate elsewhere. California is too crowded. The growth in tech and other industries has created a housing shortage which drives up the cost of living for everyone, while only the salaries of those few enterprises keep track with the housing inflation. The stress on old infrastructure drives up the costs to cities. This housing bubble is then used to drive the speculative real estate industry which further drives up housing costs. Please take your companies elsewhere, let the bubble pop, and we can all pray that the government doesn’t bail out the speculators. California housing costs should fall by a factor of 2. It was a fictitious gain in wealth and GDP anyway – a giant debt bubble that Michael Hudson has described. There will of course be short term pain — hopefully mostly for speculators trying to get something for nothing – but it is needed medicine for the people of California.

  16. Unamused says:

    What with the record heat waves, the massive droughts, the huge wildfires, and the vanishing glaciers, it’s a good thing there’s no global warming or the world would be in serious trouble.

    As for California, well, California is complicated. It’s not for the easily confused.

  17. QQQBall says:

    My partner left and moved to WA. One buddy bought a property in Montana, the other bought a ranch of some sort in Colorado. My electrician just went on a property buying trip to Montana. All three are still here for the time being, although they are already gone in many ways.

    I cannot find the interview from 15 years ago with the head of Buck Knives. They moved to Idaho… It was a really good interview – bottom line, they basically had no choice.

    I heard an interview – Cali population was 19MM and now 30MM but no additional water storage like dams built. That’s gonna be a real problem; cannot rememebr the last time it rained out here.

  18. ft says:

    California bashing is an old sport. In the sixties I learned that, if you wanted a roof over your head when traveling out of state, it was not wise to tell people you were from Berkeley. Now as then, I welcome all the bashers to either go away or stay away, as the case may be.

  19. LouisDeLaSmart says:

    It is interesting that with our current state of technology we could easily calculate the “carrying capacity” of a region in terms of population, and adjust maximum city size and required infrastructure…and yet we do not.
    Our Silicon Valley friends preach that their science and technology will solve the worlds problems. But they can’t get a grip on their own state…I am not sure did anyone tell them, but for change one needs courage and sacrifice…knowledge is preferred, education is optional.
    Where are the smart people with fancy degrees when real life problems need solving?

    • Unamused says:

      ->Where are the smart people with fancy degrees when real life problems need solving?

      They were replaced by cheap imports who can easily be sent back if they do not remain prostrate. Actual Americans have legal rights and therefore are of limited value.

      Or was that a rhetorical question?

      • LouisDeLaSmart says:

        Yes, as rethorical as it gets with a strong sense of irony.

  20. RangerOne says:

    I have serious concerns about staying in this state long long term with the way fires are going. It could be even worse than living in a flood zone. Which is. Real shame because our forests are beautiful places to own a cabin or just to visit yearly….

    But it seems like all the west cost states are getting hammered by more wild fires….

    May have to work on an exit strategy sooner rather than later.

  21. sierra7 says:

    Everybody wants something for nothing but nobody seems to want to pay for those “wants”……that’s the story of taxation.
    California can be “trying” at times but you can’t argue with “success”……I’m a life long Californian, retired for many years (more than I could have ever imagined being!); modest pension, SS, modest savings and paying a mortgage on a mountain home and haven’t paid hardly any CA income taxes for almost all the time I’ve been retired.
    It’s not the amount of taxes we (or any state) pay; it’s the way those monies are allocated.
    Too much greed. Far too much!
    As far as the CA fires are concerned, the Carr Fire (Redding) has been determined to have been started by a “….flat tire rim causing sparks”. Most forest fires are either started by lightening, careless campers, and or idiots flicking their cigarettes out the windows as they drive thru tinder dry environments. Cal. forest fires usually don’t start by “spontaneous combustion”….it takes fools to help. In addition California has some of the best well trained fire fighting organizations/equipment/infrastructure in the nation/world.
    California has many fools, but it also has some very hard workers, some of the best universities int he world…..great ambiance….natural lands…….and it’s share of societal problems.
    Don’t let the door hit you in the rear as you leave!

    • RagnArD says:

      Problem is obviously not how the fires start, it’s that they r uncontrollable when they get started.

  22. BVian says:

    California is like that crazy, neurotic, dysfunctional friend that you swear you are done with but they are just so much fun that you always end up hanging out with them *one last time*.

  23. Peters says:

    People hate on California because they’re insecure and jealous. Otherwise why bother expending all that effort?

    California delivers prosperity to many states by way of their massive demand for products and services.

    If California disappeared over night the rest of the United States would spiral into a major depression.

    Better to thank California and encourage it on than to bash it if you live elsewhere. If it has a mass exodus then all the folks bashing it will soon be inundated with Californians as their neighbors. Be careful for what you wish for because you might just get it!

    • Too Much says:

      “People hate on California because they’re insecure and jealous. Otherwise why bother expending all that effort?”

      Twent five years ago you would have been right about the jealous part. California was a great place to live.

      Now, an overpriced, crowded furrnace (with fire tornadoes I hear). It appears to be mostly owned by Chinese real estate speculators. My favorite parks and places trampled and crowded, not a spec of green space outside the designated zones.

      Since the CA state pensions are underfunded I assume the place will implode during the next eco-disaster. I only visit on business, as the place is really really sad.

      California is a hopeless place for most now.

  24. William Holzer says:

    California could employ responsible logging and tree thinning practices, but no, that would make the urbanite elites feel bad, so instead they build up massive areas of thick, dry timber and then express shock when it all burns. It’s a state run by idiots!

    • Wolf Richter says:

      “Fire suppression” has been a policy for over 100 years across the US, including in all federal areas. This has turned out to be a huge mistake because the deadwood (fuel) on the ground is now enormous, and trees that would otherwise survive regular fires, burn down in that type of conflagration. There are efforts underway across the country to carefully undo some of it, but it’s way too little, too late.

      There is plenty of logging in California. But it’s not the adult trees that are the issue, it’s the 100+ years’ of deadwood on the ground that has never been allowed to burn off, as it would have before the focus on “fire suppression.”

      Across the West, fires played an important role in the natural cycle. But these were frequently occurring smaller fires that would go through an area every few years and keep the fuel on the ground to a minimum. Adult healthy trees mostly survived those fires.

  25. Escierto says:

    Anyone who thinks Texas is the promised land hasn’t spent any time here. Yes, there is no state income tax but property taxes average 2% of the home’s value (which is constantly being reappraised to reflect true market value). The state sales tax is 6.25% and most localities can add an additional 2% on top of that.

    The state’s highways are in a constant state of gridlock and there is no mass transit to speak of. The educational system is a complete disaster. Add in one of the highest crime rates in the country and what you’ve got is a living hell.

    I have lived here over 25 years and it’s gotten steadily worse every year. It was a good place back in 1991 but now I would never move here. The quality of life in Texas is surpassed by many Third World countries.

  26. Ambrose Bierce says:

    There was a secessionist movement around 2000 before 9/11 gave Washington more power over the states. Now its coming back, including a ballot measure to split the state three ways, although I don’t understand THEIR three, it makes sense as long as the electoral college wants to give flyover America more votes than the majority in the blue states control. The west coast is part of the Pacific Rim, a trade entity together with Mexico, which creates a lot of global leverage. It is more a case of embracing new alliances rather than abandoning Lincoln’s union which is deeply in debt and bogged down in endless wars. As we test the ability to write our own immigration laws (sanctuary cities) we better forge new economic zones. About taxes, you can always lower them, but raising taxes is not an option.

    • Wolf Richter says:

      Ambrose Bierce,

      Update: The ballot measure — promoted by a nutty billionaire and CONTINUED backer of Theranos and its former CEO — to split California into three states will not be on the ballot this time.

      • Ambrose Bierce says:

        Is a multistate breakup better than sovereignty? Its hard to say. I would vote YES because I know it won’t pass, like legal weed, but it takes years for these things to evolve.

        • California Bob says:

          “I would vote YES because I know it won’t pass …”

          Same logic that brought Brexit.

  27. raxadian says:

    *Googles “It sucks to live in California”

    *Gets over thirty million results.

    California, the self destructive state?

    Welcome to the future, if everything is done online, having your company in Taxesfornia or not is no longer important.

  28. breamrod says:

    You know in 50 years California will just be one giant asian suburb with 150 million people! and China won’t even miss them.

  29. MaryR says:

    California is an absolutely beautiful state with fabulous cities, coasts, mountains, and forests, wonderful bright hardworking people, terrific universities and much more. Some of the best people from all over the US and the world live in California.

    As a native of San Francisco no longer in California, I well know the state problems of homelessness, income inequality, drought and fires, overcrowding everywhere, unaffordable housing, and unbearable traffic. And yet, are any of these truly unsolvable?

    Perhaps California could be better run if it treated its problems as if it were an independent country, rather than a state. Put the best minds on it , look at solutions from all over the world, change what needs to be changed. Perhaps then we will once again think of California as the golden state….

  30. Jas says:

    I have been hearing this nonsense about a need for more houses and how it will bring down the cost of housing. San Francisco has been going through a massive build of Luxury housing that very few who actually live in SF can afford. This has had no effect on the price or availability of housing. What we lack is AFFORDABLE housing! Not more luxury housing, thank you very much. Our new Mayor, London Greed was regurgitating the same nonsense throughout the mayoral election, which she (unfortunately) narrowly won. It also was widely distributed by real estate developers and YIMBY (yes-in-my-backyard) cult.

  31. vinyl1 says:

    “No other state has a base sales tax as high as our 7.25% nor does any state match our top marginal income tax rate of 13.3% (Hawaii’s a distant second at 11%). ”

    That is true, but only technically. In NYC, you pay both city income tax and state income tax, for a combined rate of 12.676. The NYC sales tax is 8.875%.

  32. David Miller says:

    I like the author’s dropping of “bullet train to nowhere.”

    So true – the train fetishization that you see amongst these so-called “progressives.” In state after state this nonsense routinely gets tossed out every time the political winds shift in their favor. I don’t care much for either half of our monoparty but this feature of the blue half is easily as stupid as anything the red half supposedly favors.

    Don’t get me wrong – I’ve lived in Europe and enjoyed the rail system there immensely. But in 95% of the US, with almost no infrastructure for getting about without a car once you get to the city? Complete madness.

    I remember one of these rail projects in Ohio circa 2010 was going to link Cleveland and Cincinnati. With a train traveling 39 mph on average. And an 8 hour trip (versus maybe 4 by car.) And then when you got to your destination you did what? Rented a car I guess.

  33. Citizen AllenM says:

    LoL- the commenter above hit the nail on the head- Notice mostly the poor are leaving California, because they are rapidly being priced out.

    That is the real trick- the cost of real estate is nuts, period. The returns in California have been insane compared to the rest of the country for real estate, and that track record has allowed insanity to become the rule instead of the exception.

    Bubbles are fantastic on the way up, and hell on the way down.

    And the oceans of Chinese money will eventually recede, leaving bando houses galore.

    But everyone thinks it will all be glorious.

    And the comments about how people took jobs in fast food as a starter job missed the importation of the illegal underclass over the last 30 years.

    What happens when it all goes south?

    That is going to be the ultimate question….and the answers are coming fast. See the Chinese already using that social score to regulate their people? Now, just imagine what happens when they decide that owning foreign property is a bad thing again, and it needs to be sold and the proceeds brought back to China after a big tax hit by the government, or you might just find yourself in a re-education farm.

    LoL. Stay below the event horizon, because we will eventually have full enforcement of the law at almost every level, and nobody is ready for that….

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