California's High Taxes and Regulations Drive Economic Decline and Mass Exodus

California’s proposed “billionaire tax” and government policies that inflate gasoline prices have thrust the state into the national spotlight. The persistent trend of higher taxes and tighter regulations is reshaping California’s identity—and with measurable consequences.

California’s Lagging Economy

A new report by the Pacific Research Institute (PRI), authored by Wayne Winegarden and Kerry Jackson, reveals that California’s economic performance has significantly underperformed the rest of the United States since the COVID-19 pandemic. Job growth in California has been less than half the national rate, and the state’s high cost of living is eroding its income advantage.

According to the PRI analysis, California’s share of the national economy has dropped sharply from its 2021 peak and now stands at approximately 13.8 percent. Had the state maintained its 2021 share, its economy would be 4.6 percent larger today—equivalent to an additional $14,000 for every household.

An Exodus of People and Businesses

Long before the PRI report, data from the Public Policy Institute of California (PPIC) showed that California has been losing residents. From 2010 through 2024, nearly 10 million people moved out of California to other states, while just over 7 million moved in. The state now experiences net losses across all income groups, including high-, middle-, and lower-income households.

The proposed 5 percent (and potentially higher) wealth tax has accelerated the departure of high-net-worth individuals. Notable figures such as Mark Zuckerberg, Larry Page, and Sergey Brin have relocated. In January, venture capitalist Chamath Palihapitiya estimated that $1 trillion in wealth fled the state ahead of the January 1 deadline for retroactive application of the tax.

Businesses are also leaving. Tesla relocated its headquarters from California to Texas, as did energy giant Chevron and real estate leader CBRE Group. Palantir moved first to Denver, then to Miami. While new businesses continue to form in California, opportunities are increasingly limited as entrepreneurs choose to establish themselves elsewhere.

Winegarden and Jackson note that job growth from February 2020 to December 2025 has been less than half the national rate. They add that outside of healthcare, California’s private sector employment market is not just stagnating—it is shrinking.

Supporting this trend, PPIC reports that 21 percent of Californians have considered leaving the state due to the lack of well-paying jobs.

Why Are Jobs, Businesses, and People Leaving?

The answer, according to the report, lies in policy failures. Residents face steep housing costs, high-priced energy, an expensive cost of living, and high taxes—factors that collectively offset economic benefits and push individuals and businesses to seek better opportunities elsewhere.