California residents more turned off by high home prices than tax rates, study finds

Average home prices in California are more than double the national average

While Americans have opted to leave California throughout recent years, it may not be because of the high tax rates.

A report authored by California State Controller Betty Yee looked at taxes in the state and their impact on businesses and the outmigration of residents, in an effort to address concerns that the state may be limited in its ability to raise revenue through its income tax system.

The report concluded that the state could lose about $1 billion per year as people leave the state. 

Yee noted, however, that net domestic outmigration is often offset by net international in-migration, largely making up for tax revenue losses.

Domestic outmigration overtook the net international inflow from 2018 to 2020, leading to a 0.2% decline in tax revenues between 2015 and 2018.

"The evidence available to date suggests that recent net outmigration from California has reduced, but not reversed, the rate of growth in California income tax revenues," Yee concluded.

Changes in income taxes appeared to have little effect on the state’s high net worth residents.


More than the tax system, however, Yee noted that home prices are the "single biggest factor" driving migration decisions. 

"The average home price in California is more than double the U.S. average," the report noted. "The high cost of housing in California makes it more difficult for current California renters to strengthen their ties to California by purchasing homes, makes it harder for potential in-migrants to move here, and encourages current homeowners to extract value from their homes by moving to less expensive states."

Home prices are surging throughout the U.S., including in California where the median price hit another record high in May. The statewide median price climbed to $818,260 in May, up 39.1% year over year. That is the single largest annual price gain ever recorded.


As previously reported by FOX Business, California was among the top 5 states with the most outbound movers in 2020, where 64% of moves consisted of people leaving the state.

While the data analyzed by the state largely does not include patterns from the pandemic, Yee said some areas—like San Francisco – have experienced a large outmigration with a rise in opportunities for telework. Many of those residents, however, moved to other areas of the state.

Researchers were unable to conclude how or if the pandemic-related moving patterns would change once situations normalized.