California loses wealthy residents to red states amid ongoing tax fight

California’s struggles with taxes and regulations collide with a broader economic shift as wealthy residents and entrepreneurs take their money elsewhere. windfall capitaljobs and taxpayers to red state rivals.

This shift is already visible in migration patterns across the country.

From 2021 to 2024, Texas and Florida recorded the largest net population gains, while California and some northeastern states recorded some of the sharpest losses, according to IRS and U.S. Census Bureau data.

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These immigration trends are currently colliding with a political fight over how the Golden State taxes its wealthiest residents.

At the center of the debate is a proposed ballot initiative backed by the Service Employees International Union that would impose a one-time 5% wealth tax. Californians Its assets, including unrealized gains, exceed $1 billion.

If the measure is eligible for the November ballot and approved by voters, it could be applied retroactively to anyone living in California as of Jan. 1, 2026.

Supporters say the measure would increase health and education funding, while critics warn it could drive investment and talent out of the state.

These concerns come as income migration data already shows money leaving many traditionally blue states.

IRS figures show traditionally blue states are losing billions of dollars in adjusted gross income (income used to calculate federal taxes) as their residents move to lower-tax states, especially across the South and Sun Belt.

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Steve Moore, co-founder of Unleash Prosperity, said California’s tax base will continue to erode as more high-profile tech billionaires relocate ahead of a proposed wealth tax.

“California’s tax base took a big hit at the end of last year. Silicon Valley billionaires left the state, taking their wealth and future wealth with them,” Moore said, attributing the moves to the proposed 2026 Billionaire Tax Act targeting the state’s ultra-rich.

“These business people are running to states like Florida and Texas because of lower taxes, economic freedom and future economic prosperity,” he said, describing it as “voting with their feet.”

“It is prudent for business leaders to choose a place for future financial success rather than economic drowning,” he added.

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California Governor Gavin Newsom said the wealth tax should be addressed at the national level. (Bill Pugliano/Getty Images)

Governor of California Gavin Newsom He also opposed the proposed wealth tax, warning that the tax could backfire while defending the state’s current progressive tax system.

“I’ve been struggling with this for months because it’s exactly what I feared would happen – and now it has. This is something I’ve been warning about for years.” Newsom told New York Times.

Newsom said he has long opposed the measure and believes taxing the ultra-wealthy should be handled at the national level, not on a state-by-state basis.

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Texas Gov. Greg Abbott’s office told Fox News Digital that he will continue to welcome businesses and residents fleeing California to his state. (David Paul Morris/Bloomberg via Getty Images)

Even as Newsom raises alarm, Republican governors in Florida and Texas say they are already taking advantage of businesses and residents leaving California.

Texas Gov. Greg Abbott’s office echoed that sentiment, saying the state continues to attract companies that want lower taxes and a lighter regulatory environment.

“People and businesses are voting with their feet and are consistently choosing to move to Texas over other states,” said Andrew Mahaleris, an Abbott spokesman.

He added that Texas’ lack of corporate and personal income taxes and predictable regulatory environment make it an attractive destination for companies considering leaving California.

Florida Governor Ron DeSantis called the California proposal “economic insanity.”