Overview

California is facing significant economic challenges attributed to high taxes and stringent regulations. A recent report highlights the state's declining economic performance and job growth, as well as a notable population exodus.

The proposed "billionaire tax" and rising gasoline prices are among the policies contributing to these issues, leading to a sluggish economy and job losses.

Key details

  • California's economic growth has lagged behind the national average, with job growth post-COVID-19 at less than half the national rate.
  • The state's share of the national economy has decreased from its 2021 peak and is currently stagnant at approximately 13.8 percent.
  • If California had maintained its 2021 economic share, the state's economy would be 4.6 percent larger today, translating to an additional $14,000 per household.
  • From 2010 to 2024, nearly 10 million residents left California, while just over 7 million moved to the state from elsewhere in the U.S.
  • There are net losses among higher-income, middle-income, and lower-income households in California.
  • Proposals for a wealth tax of 5 percent or higher have prompted high-profile individuals, including tech leaders, to relocate from California.
  • Venture capitalist Chamath Palihapitiya estimated that $1 trillion in wealth left the state before the proposed tax deadline.
  • Major companies such as Tesla, Chevron, and CBRE Group have relocated their headquarters out of California.
  • Despite new businesses emerging, the overall job growth from February 2020 to December 2025 has been significantly lower than the national average.
  • California's private sector employment, excluding healthcare, is reportedly shrinking.
  • 21 percent of Californians have considered leaving the state due to a lack of well-paying jobs.
  • California ranks 46th in state taxation according to the Cato Institute, with combined state and local tax collections at 13.0 percent of adjusted personal income.

Context

The combination of high living costs, steep housing prices, and burdensome regulations has created an environment that discourages both businesses and residents from staying in California.

What happens next

As the state grapples with these economic challenges, it remains to be seen how policymakers will respond to the growing concerns about taxation and regulation, and whether these changes will impact the ongoing population and business exodus.

What we don't know yet

Details regarding the specific impacts of the proposed billionaire tax and the full extent of the population decline are not confirmed.