California’s $68 billion deficit: Housing costs, population loss, remote work, and income tax decline contribute. Ouch.

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California faces a record $68 billion deficit — here’s what is eating away at the Golden State’s coffers.

California has also lost residents and businesses — and therefore, tax revenue — in recent years.

The Golden State’s population declined for the first time in 2021, as it lost around 281,000 residents, according to the Public Policy Institute of California (PPIC). In 2022, the population dropped again by around 211,000 residents — with many moving to other states like Texas, Oregon, Nevada, and Arizona.

“Housing costs loom large in this dynamic,” according to the PPIC, which found through a survey that 34% of Californians are considering moving out of the state due to housing costs.

Other factors such as the post-pandemic remote work trend — which has resulted in empty office towers in California’s downtown cores — have also played a role in migration out of the state.

There’s also this: “Total income tax collections were down 25% in 2022-23, according to the LAO — a decline compared to those seen during the Great Recession and dot-com bust.”

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Losing 200,000 or so residents wouldn’t hit income tax revenues that hard — so either a lot of Sacramento’s taxpaying whales left the state, the state’s economy is in much worse shape than it appears, or some combination of the two.

Whatever the case, Californians will continue to get it good and hard.

by Stephen Green

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