People leaving the Bay Area are more affluent than new arrivals. Here’s why that matters.

In slow motion we are watching the collapse of the San Fran bay Area.  The large firms that have left and are leaving, taking employees with them.  Families leaving since they no longer want their children living on a government promoted Toilet Bowl.  The rich are leaving and the much less rich are coming in.  Tax revenues will start going down.

“The departure of higher-income residents is worrisome for those who remain in the Bay Area, left to pick up the tab for the state’s long list of financial obligations.

New arrivals were less affluent in Alameda, Contra Costa, San Mateo and San Francisco counties. The only exception was Marin County.

The IRS data shows that those who moved out of San Francisco County between filing their tax returns in 2017 and 2018 had taxable income on average of $150,905 vs. $117,321 for those moving into the county. “

We already know Twitter is looking to leave—as the big firms leave, so will the vendors of these firms.  Watch the twin disasters of AB 5 implementation along with the carless downtown San Fran.  Businesses will flee or close.

People leaving the Bay Area are more affluent than new arrivals. Here’s why that matters. 

High taxes and housing costs are cited as factors driving the affluent out of the Bay Area.

 

By Mark Calvey, San Francisco Business Times, 2/20/20   

People leaving four of the five counties of the inner Bay Area had higher average incomes than those moving into the region, according to an analysis of the IRS’s latest migration data by Civic Analytics, an economic research and consulting firm.

The IRS looked at individual tax returns where taxpayers’ tax returns filed in 2018 reflected a different address from their returns filed in 2017. The latest IRS migration data does not reflect the full impact of the new federal tax law that went into effect in 2018, which made Bay Area living even more expensive by capping the federal deduction for state and local taxes paid at $10,000. One third of San Francisco’s residential property owners pay annual property taxes of more than $10,000, according to Attom Data Solutions. Many Bay Area residents did not feel the full effect of the new federal tax law on their finances until they filed their 2018 tax returns in 2019.

The departure of higher-income residents is worrisome for those who remain in the Bay Area, left to pick up the tab for the state’s long list of financial obligations.

New arrivals were less affluent in Alameda, Contra Costa, San Mateo and San Francisco counties. The only exception was Marin County.

The IRS data shows that those who moved out of San Francisco County between filing their tax returns in 2017 and 2018 had taxable income on average of $150,905 vs. $117,321 for those moving into the county. 

Those figures don’t come as a surprise to accountants serving as field guides for the affluent leaving the state.

“I think new arrivals to the Bay Area are younger and at the beginning of their careers, so it makes sense there is an income shift,” said Paul Bleeg, a partner with accounting firm EisnerAmper in San Francisco. The income figures are averages based on the number of tax returns, so a few high-income taxpayers on the move could have a significant impact on the number. 

“I’ve seen a quiet migration out of the state,” Bleeg told me. “My clients and others cite the high taxes.” Bleeg and others tend to date the Bay Area exodus to 2012, when a state income tax increase pushed the top rate to 13.3%.

“Many of my clients are in companies that have recently gone public and they have considerable wealth tied up in founders shares,” Bleeg said. “So the strategy is that they move to Nevada, Washington or another state with no state income tax and then sell their shares once they have terminated their California residency.”

In addition to taxes, the Bay Area’s high cost of living is another reason some leave.

“The cost of housing is also a factor,” Bleeg said. “Everyone knows we need more housing but no one wants it in their town.  “NIMBYism is rampant, and it’s so unfortunate that we make it so hard on young people to afford a house within an hour’s commute of where they work,” Bleeg said. “I love the expression, ‘Pull the ladder up, I’m aboard,’ meaning, ‘I’m OK, I got mine, damn the rest of you.’”