Goodbye California, New York, Illinois: Blue State Exodus Will Accelerate

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Posted: May 02, 2018 9:09 AM
Goodbye California, New York, Illinois: Blue State Exodus Will Accelerate

People are exiting "blue" states and the reason isn't the weather. The Trump tax cuts will accelerate the exodus.

A Chicago Tribune commentary says Hello, exodus deniers: No, it isn't Illinois' weather.

"For four years in a row, Illinois has lost population in alarming numbers. In 2017, Illinois lost a net 33,703 residents, the largest numerical population decline of any state. That’s the size of St. Charles or Woodridge or Galesburg. Wiped off the map. In one year."

Asked why they were leaving people overwhelming said taxes or the illinois budget mess.

“We could handle the cold, avoid the crime and pay the tax. But the government turned on us (property, income, sales, parking, red-light/speed cameras, bags, soda). Never-ending. Tired of paying for everyone else's retirement before mine,” said one respondent.

Trump Tax Cut Will Accelerate the Trend

The Wall Street Journal reports blue states will lose millions of people in the years to come—and they aren’t ready. It's a case of So Long, California. Sayonara, New York.

"As the Trump tax cut was being debated in December, California’s Gov. Jerry Brown called the bill “evil in the extreme” and fumed that it would “divide the hell out of us.” He’s right—but in the end, this change could be good for all the states.

In the years to come, millions of people, thousands of businesses, and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states. This migration has been happening for years. But the Trump tax bill’s cap on the deduction for state and local taxes, or SALT, will accelerate the pace. The losers will be most of the Northeast, along with California. The winners are likely to be states like Arizona, Nevada, Tennessee, Texas and Utah.

For years blue states have exported a third or more of their tax burden to residents of other states. In places like California, where the top income-tax rate exceeds 13%, that tax could be deducted on a federal return. Now that deduction for state and local taxes will be capped at $10,000 per family.

Consider what this means if you’re a high-income earner in Silicon Valley or Hollywood. The top tax rate that you actually pay just jumped from about 8.5% to 13%. Similar figures hold if you live in Manhattan, once New York City’s income tax is factored in. If you earn $10 million or more, your taxes might increase a whopping 50%.

About 90% of taxpayers are unaffected by the change. But high earners in places with hefty income taxes—not just California and New York, but also Minnesota and New Jersey—will bear more of the true cost of their state government. Also in big trouble are Connecticut and Illinois, where the overall state and local tax burden (especially property taxes) is so onerous that high-income residents will feel the burn now that they can’t deduct these costs on their federal returns. On the other side are nine states—including Florida, Nevada, Texas and Washington—that impose no tax at all on earned income.

Delusional liberal interest groups want blue states to respond to the Trump tax cuts by soaking their rich residents even more. If that happens, our best advice to blue-state residents is simple: Git while the gittin’s good."

Make a New Plan Stan

We have plans in place to get the hell out of Illinois. I suspect we will be gone in about 2 years.