Posted on 09/23/2022 1:06:05 PM PDT by grundle
In no region of the country did migration in the years before and into the pandemic pack such a devastating economic punch as the Bay Area.
Bay Area counties collectively saw a net loss of $14 billion in adjusted gross income in 2019 and 2020 from migration, according to the Business Journals' analysis of nationwide county-by-county census and tax data, led by San Francisco’s loss of nearly $6.9 billion. Collectively over this time, the region saw a net loss of almost 60,000 tax filers. (This analysis includes, in addition to the Bay Area’s nine counties, Santa Cruz, San Benito and Monterey counties, to incorporate the full coverage areas of both the San Francisco Business Times and the Silicon Valley Business Journal.)
By comparison, New York County (Manhattan) saw an even sharper drop than San Francisco at $14.5 billion, and the 23-county New York City metropolitan area’s income loss was larger at $22.2 billion — but its population is more than double the expanded Bay Area that is included here.
The loss of these residents — and their incomes — threatens to dampen local tax revenues, consumer spending that supports a range of industries, philanthropic giving and the region’s overall post-pandemic economic recovery.
“The Bay Area is losing some folks that are fairly well-to-do, and they’re taking their cash and whatever human capital they had to help build their wealth to other cities,” Mark Vitner said in an interview shortly before retiring this month as Wells Fargo senior economist. The Bay Area’s loss has meant huge gains for cities such as Nashville, Miami, Dallas and Raleigh, North Carolina.
“Certainly, you’re not going to have this gravy train that you’ve had for the last 10 years,” Vitner said, adding that the impact goes well beyond the Bay Area’s public coffers: “Most philanthropic organizations are highly dependent upon a handful of very generous donors.”
The Bay Area’s outmigration of recent years — and its characterization as an “exodus” — has been challenged in some quarters as merely anecdotal or questioned based on limited data sets, such as post-office mail forwarding requests. Based on more recent data, the ability to deny outmigration is melting faster than an ice cube in a Bay Area heat wave.
The amalgamation of census and tax data supports what anecdotal evidence has long suggested: Departures from the region are largely concentrated among upper-middle-class and wealthier residents. For example, the average taxpayer who filed tax returns from San Francisco previously, but from new a location in another state in 2019 or 2020, reported annual adjusted gross income to the Internal Revenue Service of more than $196,000.
Outmigration accelerated during the pandemic as the embrace of remote work unleashed employees from their office cubicles, freeing many to move elsewhere in the country oraround the world. At the same time, startups and their financial backers are seeing value in building businesses in lower-cost cities, providing some residents filling jobs with another incentive to leave the region.
The region’s long-booming tech sector, and more recently the torrent of Covid relief funds, helped mask wider problems that have unfolded across the state and the region. Statistics are starting to lay these challenges bare. The effects here could be long-lasting — and dramatic.
“In the last decade, the California economy has been completely dominated by the Bay Area. So for California, we’re now beginning to enter the territory of Illinois, Connecticut, New Jersey and New York,” Joel Kotkin, a professor at Southern California’s Chapman University, said, referring to states facing high taxes, hefty public expenditures and residents moving away to friendlier climates. “What happens is your tax base begins to go away.”
The Golden State risks losing some of the most promising sectors, such as space, electric vehicles and batteries, said Kotkin, a longtime observer of the California economy.
“We’re going to become increasingly like Hawaii, a place where people who can afford it live there, or they come in and live there for a few months. Then they go back to wherever they live because they don’t want to pay these taxes,” Kotkin said, adding that he sees higher taxes on the horizon. California voters will decide in November whether to approve Prop. 30, which would raise the state’s top tax rate to 15.05% for those with incomes of at least $2 million.
“It’s a reinforcing process where you reduce the amount of wealth staying in the state, but your demand on the remaining wealth becomes even greater,” Kotkin said. “At some point, even the rich can only take so much harassment.
“We’re in a cycle where our demand for money is growing, but our ability to pay is going away,” Kotkin said. “We’re gutting the golden goose.”
The threat of lower tax revenue, especially as Covid relief money runs out, is a growing concern among Bay Area business leaders. The problem goes well beyond the loss of individual income taxes to include commercial property taxes, sales taxes and other levies.
“If we have a drop in tax revenues from a profound drop in business activity, that’s going to be felt by everyone,” said Matt Field, president of San Francisco real estate developer TMG Partners. He simply says it’s going to be a “hot topic” for Bay Area leadership to navigate some unpleasant options: cutting public services or adding to the tax burden of residents and businesses who remain.
As the data rolls in on the pace of outmigration, there’s a growing awareness that action is needed to avoid seeing more companies and residents deciding to leave, threatening further decline.
“If you miss what’s happening — changes in the economy and environment — things can fall far and fast, which is what happened in Detroit. We don’t want to see anything like that happen here,” said Jim Wunderman, CEO of the business-backed Bay Area Council.
“If we want to restore our region to the place of promising leadership that it held, we’re going to have to take some action,” Wunderman said. “It’s going to require us to move on several fronts. In some cases, it’s going to make people uncomfortable.”
Vitner, the former Wells Fargo economist, says he isn’t ready to give up on the Bay Area yet — “There’s not a lot of places in the country where you’ve got a Stanford and a Cal-Berkeley” — but sees permanent changes underway.
“For a long time, particularly in the tech business, if you wanted to be serious, you had to have a big presence in San Francisco,” Vitner said. “That’s where you were going to find all of the other professionals you were going to need to grow your business.
“With folks leaving, people saying ‘It’s just not as important to be here,’ it feeds on itself.” How the Bay Area is like a doughnut
While billions of dollars in income have bled from the Bay Area’s urban core, the same is not true on its northern and southern fringes.
The North Bay counties of Marin, Napa and Sonoma, as well as Santa Cruz, Monterey and San Benito to the south of San Jose, bucked the region’s trend: Each saw a net gain in incomes due to inter-state migration during 2019 and 2020. All but San Benito shed more tax filers out of state than they gained during that time, showing that replacements were on balance fewer but wealthier than those who departed. That’s mirroring an in-state “doughnut effect” that’s been noted in various metropolitan areas around the country, with suburbs gaining wealthy residents at the expense of central cities. It’s often attributed to those with means, freed from their commute in the era of work-fromhome, seeking an opportunity to get more space further from the urban core, briskly bidding up home prices in the process.
For example, in 2020, Marin County saw home values rise by 30%, Zillow reports.
In any case, the trend is not escaping notice in places which are seeing an influx of new people.
“I am certainly seeing the migration in my neighborhood,” said Tim Myers, CEO at Bank of Marin. “A lot of my new neighbors came out of San Francisco. It was always a trend of people with families moving up here, because they’re getting away from density and all of that. I am seeing young people, even without families, moving to places like San Rafael, which we really didn’t see before.”
Others, however, discount claims that the “doughnut” is anything new.
“There was (already) an outflow to the suburbs of young, affluent families from San Francisco,” said Michael Blakeley, CEO of the Marin Economic Forum. “It may have accelerated.”
WHERE THEY'RE GOING
No. 1 out-of-state destination in 2019-2020 for those leaving each Bay Area county:
Alameda King, Wash 921
Contra Costa Maricopa, Ariz. 519
Marin King, Wash. 104
Monterey Yuma, Ariz. 164
Napa Maricopa, Ariz. 49
San Benito Maricopa, Ariz. 33
San Francisco New York, N.Y. 1,307
San Mateo King, Wash. 543
Santa Clara King, Wash. 1,693
Santa Cruz King, Wash./Multnomah, Ore. 89 (tie)
Solano Clark, Nev. 234
Sonoma Maricopa, Ariz. 202
Look how many of the stupid libtards are moving to Seattle
Bahahah like it’s going to be any better they’re so incredibly stupid
Obviously, the rats are slacking off to only “consume” that much money!
Florida's State income tax rate is ZERO... for everyone.
Thank Goodness that Idaho is not #1 on any of the destinations.
Florida’s State income tax rate is ZERO... for everyone.
Ssshhh...you don’t want THOSE migrants there!
Harder to fly them to Martha’s Vineyard...
Out with the Taxpayers and in with the Leeches
I love living here in Idaho and am glad we have a state income tax. It keeps the leftist morons mostly in Washington. Now if Washington ever implements a state income tax, well then Lord help us all.
It’s almost like..
If you continually tell the rich people how much you hate them.
And how you are going to take away all of their money.
And they are evil.
They may actually just get the message and leave.
Those who are employable and can afford it are leaving. Those who are not and can’t are staying.
Also, read this with a grain of salt. Having lived in San Benito County, I know of at least 10 families that have moved to Idaho in the past 4 years. Undoubtedly there are many more, we just all ended up in different counties in Idaho. If you calculated this by state rather than county, I suspect Idaho would be much closer to #1 for San Benito County.
WA state has no income tax.
We grew up in Menlo Park two parents and seven kids. Two bedroom, one bathroom. Our father was in the Air Force, and instead of moving us around, we stayed in Menlo Park and he managed to get assignments at nearby bases, Travis, Hamilton, etc. Sometimes he had assignments that would take him away for a week or two. The Vietnam. He had flown in WWII and Korea. He hated commies and went to Vietnam also. Fortunately he survived it all.
In Menlo Park and surrounding areas, every time a house would sell, they would scrape the house and build 4 homes where only one stood before. Eventually it was too much. Now, there are employees of Stanford University and Stanford Hospital that live in RVs. The average rent for a small apartment is $3,000 / month.
Are the municipalities surprised by this?
Hey, if it’s bodies they need, I know where there are hundreds of thousands of people ready to hop on a bus or plane and make their way to the Bay area.
1) Import lots of impoverished, uneducated people with different languages and cultures
2) Tax the productive citizens to house, clothe, educate and medicate the immigrants
3) Shame and punish anyone who objects
4) Compound the taxation by promoting homelessness and open-air drug abuse, urination and defecation
5) Wonder cluelessly why those who can afford to relocate are actually doing so.
Well, it’s easy to see what has happened to King County, Washington recently — it’s filling up with what old time residents of Washington State used to call “Californicators”.
And New York? That’s laughable.
Bay Area counties collectively saw a net loss of $14 billion in adjusted gross income in 2019 and 2020 from migration,
That would probably be similar in Los Angeles and San Diego and yet, the State of California had an amazing no, YUGE!, budget surplus...
I thought that was odd as well (NYC); here in NJ we get people fleeing NYC, and the smart ones move much further than NJ. We had a boom in jobs years ago as companies moved from NYC; now they don’t even bother with NJ.
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