Armstrong Economics: 01-04-2026,
California is now facing the consequences of policies that ignore reality. Between 2019 and 2023, the state lost a staggering $91.4 billion in income as residents relocated elsewhere, with another $11.9 billion leaving in just a single year. This is not a minor shift. This is a structural problem that is accelerating, not stabilizing.
What is driving this exodus is not complicated. California has one of the highest income tax rates in the country at 13.3%, and it treats capital gains as ordinary income. At the same time, housing costs remain among the highest in the nation, with median home prices still hovering well above $700,000 in many regions and far higher in major metro areas. When you combine taxation and cost of living, you create an environment where even high earners begin to question whether it is worth staying.
What is unfolding now is not just population loss. It is the migration of productive capital. Texas alone absorbed nearly $28 billion from California migrants. That represents businesses, investments, and long-term economic activity shifting away from California’s control. These are not low-income households leaving. These are higher earners, entrepreneurs, and investors who contribute disproportionately to the tax base.
You can see this reflected in the composition of those leaving. Higher-income households account for a significant share of outbound income, meaning a relatively small number of people are responsible for a very large portion of the loss. That is what makes this trend so dangerous.