Newly proposed taxes in California could lead to more growth in Arizona

People have been migrating from California to Arizona for years, taking advantage of Arizona’s lower cost of living, better tax structure, better climate, etc. Now, with newly proposed additional taxes in the Golden State under the leadership of newly christened governor—and possible 2020 democratic presidential candidate—Gavin Newsom, California residents may have another reason to head over one state to the east.

In 2018, California took in record tax revenue, beating out estimates by about $1 billion. And overtaxed workers—especially those in Silicon Valley making $100,000 or more—will be seeing more taxes adding to that revenue. Gov. Newsom is proposing to extract an additional $500 million so the state can work on subsidizing workers’ housing. The idea here is that the new governor may require companies to match the state’s contributions, hauling in more tax revenue.

What this means for California, and, in turn, Arizona, is a steady exodus and subsequent migration to greener—or desert-like—pastures.

“[California’s] overregulation is causing economic woes and housing affordability problems. It creates opportunities for us,” Jim Rounds, an economist from Rounds Consulting, said. “So all those things that matter [taxes, public transportation, regulations], they’re not fine-tuning those. They forgot the fundamentals. [Arizona] is understanding them as to how they grow the economy.”

In 2017, Arizona gained more than 107,000 residents, one of the largest population boons in the nation, according to the Census Bureau. The Bureau goes even further, stating that every year over the past three years, Arizona has gained at least 30,000 California transplants. But, according to Rounds, California is still a farm system for the world’s tech labor force, creating strong jobs in the tech sphere.

The only catch there is that a lot of tech employees are getting their feet wet in the Golden State then packing up and heading to Arizona for the growing opportunities in their field that have been boosted year over year here in the state. That rapid growth should lend a hand to the job market and housing market here in Arizona.

Cost of housing is a major hurdle for California residents. The median house price in the San Francisco area nearly hits $1.4 million dollars. Then you tack on state taxes and an income tax rate around 9.3 percent, and mortgages can exceed $6,000 monthly. What this has done for California, especially in the San Francisco area, is drive up costs and drive out tech employees to live in towns up to 100 miles away and make the commute or live in the city with at least a couple roommates or even save money by living inside their cars—while still clocking in at major tech companies. Contrast that with Maricopa County in Arizona, for example, where the average house costs about $270,000, according to Zillow.

Homelessness in California in general has reached epidemic proportions with cities like Los Angeles, San Diego and San Francisco dealing with homeless camps pocketed throughout their urban areas. In fact, Los Angeles saw a 75 percent increase in homeless people between 2010 and 2017, counting as many as 55,000 homeless Los Angelenos. That’s basically a small city within a city.

“California does have a homeless problem, but it’s more about housing distress,” adds Rounds. “Part of that has to do with bad management and planning and over regulation. What they’ll do is break the fundamentals and overregulate how housing can be built and where.”

Time will tell how the newly proposed taxes in California will play out and how they will continue to cripple those housing and job markets in the state. But even more importantly, while the nation waits to see what happens in California, it’s safe to say that Arizona will see a continued influx of educated and tech-ready Californians ready to contribute to our state.

“California’s economy is so large, but we only need to grab a small percentage of their economy to see big impact here,” says Rounds. “This is why you have a leak and you fix it. It’s cheaper to maintain things than to let it go. This is something that can exacerbate, and more money will be flowing in from California.”