In California, Atlas Twitches

It seems over the last several years quite a few stories have cropped up in the news of Californians abandoning the state.

In 2005, they were headed to the Midwest;

A growing number of people are leaving California after a decade of soaring home prices, according to separate data from the Census Bureau, the Internal Revenue Service and the state’s finance department.

Last year, a half million people left California for other parts of the United States, while fewer than 400,000 Americans moved there. The net outflow has risen fivefold, to more than 100,000, since 2001, an analysis by Economy.com, a research company, shows, although immigration from other countries and births have kept the state’s population growing.

In other words, even though they were loathe to admit it, illegal immigration kept the state’s population growing. The housing bubble was in full bloom; new home construction was fueling the labor force, even though there were rumblings of something wrong;

“People are saying, ‘Even though I have to take a 10 percent wage cut to go to Vegas or Phoenix, it’s actually a wage increase,’ ” said Ross C. DeVol, the director of regional economics at the Milken Institute, a research group in Santa Monica, Calif. “They look at what housing costs here, and they’re making decisions to go elsewhere.”

In 2008, it was being called a “stampede”;

“When California faced a Mount Everest-sized $14 billion deficit in 2003, one of the major causes for the red ink was the stampede of millionaire households from the state,” says a report called “Rich States, Poor States” by economists Arthur Laffer and Stephen Moore. “Out of the 25,000 or so seven-figure-income families, more than 5,000 left in the early 2000s, and the loss of their tax payments accounted for about half the budget hole.”

And it’s not just the rich leaving. Based on data from moving companies, California had the second-highest domestic population out-flow of any state in 2005, according to the report, “despite the beautiful weather, beaches, and mountains.”

Today the $14 billion deficit is closer to $41 billion post burst, construction is slowing to a halt, and not even the illegal immigrants are finding work.

With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates. A multibillion-dollar plan to remake downtown Los Angeles has stalled, and office vacancy rates there and in San Diego and San Jose surpass the 10.2 percent national average.

Median housing prices have nose-dived one-third from a 2006 peak, but many homes are still out of reach for middle-class families. Some small towns are on the brink of bankruptcy. Normally recession-proof Hollywood has been hit by layoffs.

“You see wages go down and the cost of living go up,” Reilly says. His property taxes will be $1,300 in Colorado, down from $4,300 on his three-bedroom house in Nipomo, about 80 miles up the coast from Santa Barbara.

The net loss as of 1 July 2008 was 144,000 people, by July 1 2009 with the economy in the tank what will the numbers be? And a majority of those departures are taking their tax base with them. The ones staying will be facing a Democrat controlled legislature intent on illegally raising taxes on them as they struggle to stay afloat with layoffs climbing as businesses leave. Those that actually pay taxes that is, rather than consuming them.

Where are they all going? And will it even matter?

One thing is evident, the ones leaving are by and large the ones whose presence will be most missed; taxpayers. Their departure means more revenue lost to the state coffers, which in turn will cause them to want to raise taxes higher in what might be the final death spiral as California circles the drain.

Or it could be a chance for conservatives to finally spread the message that the tax and spend mania really doesn’t work and wrestle control away from the ones who drove us to the brink. It may be the last opportunity.

All I know is this; it sucks to be Atlas in this state.