Email  Print

Study on state’s woes ignores profit motive

  No academic (or pseudo-academic) study has had more impact on California public affairs this fall than a 32-page tome about what’s wrong with this state, coming from the New York-based Manhattan Institute and bearing the ominous title, “The Great California Exodus: A Closer Look.”

  Trouble is, this study doesn’t look closely enough at the real roots of the trend of the last 20 years, in which more Californians have departed to other states than have arrived here from elsewhere in America.

  Of course, California has not actually lost population: The U.S. Census showed state population was up 3 million between 2000 and 2010, with most of the increase from a combination of foreign immigration and live births. This, despite an outflow to other states of about 3.4 million persons.

  And yet, in terms of domestic migration, California has lost ground over the past 20 years.

  And the state also lost income, according to the Manhattan Institute report, principally authored by Thomas Gray, a Cambria-based freelance writer and former editorial page editor of the Los Angeles Daily News.

  Californians who moved to Texas had $4.07 billion in income between 2000 and 2010; those moving to Nevada took $5.67 billion of income with them, and those going to Arizona $4.96 billion. Gray, and co-author Robert Scardamalia, used Internal Revenue Service summaries to reach those figures.

  They attribute the outflow from California primarily to jobs, taxes and density.

  No doubt, individual reasons for leaving California are complex, but even Gray concedes the Manhattan Institute’s list is incomplete, at best. For one thing, there is no mention of the profit motive.

  The study cites jobs and taxes as the two prime reasons for persons to leave California. That’s utterly predictable given that the institute is libertarian-leaning and its board is drawn almost exclusively from big business.

  The jobs/taxes conclusion has already increased the push for reducing regulations on business while discouraging tax increases.

  If you’re trying to reduce regulations and you don’t want more taxes, why talk about the profit motive, or what Gray has called the “cash-out factor,” the incentive many Californians have to sell high-priced real estate, buy a far larger place in Arizona, Texas, Nevada, Idaho or Oregon, and pocket hundreds of thousands of dollars in profits.

  Gray also concedes that, “If people are retiring,” the profit motive “can be very important.” But he says he didn’t include it in his study because, “No one can quantify this.”

  He also didn’t calculate how much of the income going elsewhere was in the form of Social Security payments and pensions – usually classed as unearned income.

  Here’s a true story: A couple from Culver City retired last spring with hefty pensions and immediately moved to Las Vegas. They sold their longtime home for more than $800,000 and bought a larger, newer place for $280,000. Similar stories have been repeated so often that it’s probably no longer an anecdote, but an indisputable factor in departures from California.