New IRS Data Finds California is Gaining More Millionaires Despite Record Outbound Migration

New findings by Bloomberg via IRS data have found that, despite a significant exodus of residents from California since the late 2010s causing overall state population loss, California has continued to make more millionaires during the same time frame, with the number of residents making more than $1 million a year in the state going up by 66% from 2019 to 2021.

Since the 2010s, Californians have left the state in greater numbers because of a variety of factors including high taxes, the high costs of living, tight business regulations, new home costs, crime, and job opportunities out of state. Residents, as well as businesses, have largely focused on moving to states such as Nevada, Arizona, Texas, Florida, Idaho, Wyoming and Tennessee. In 2022, over 800,000 Californians left the state for elsewhere.

Focus has been especially placed on millionaires and billionaires leaving the state, with high profile tech sector and Hollywood residents moving elsewhere. In recent years this has included Oracle Co-Founder Larry Ellison moving to Hawaii, Tesla CEO Elon Musk moving to Texas, and movie star Sylvester Stallone most recently going to Florida.

However, despite many high-profile people moving out, California has more people becoming millionaires faster than other millionaires can move out.

Reports last year found that the number of Californians making more than $50 million jumped up by 158% from 2019 to 2021, from 1,231 to 3,182 people. Even more, during those two years, 116,000 new millionaires sprouted up within the state.

New data released by the IRS in the past few weeks reveals just how acute this, with the number of Californians making $1 million or more a year going up by 61,900, or 66%, from 2019 to 2021.

California’s share of new millionaires also went up, rising to to 17.9% in 2021 from 17% in 2019. Meanwhile, the next three top millionaire states, New York, Texas, and Florida couldn’t keep up, actually losing their total share of millionaires. In total, California gained .9% of millionaires in the country, with New York going down 1.29%, Texas .31%, and Florida .13%. While California is losing wealthier people, with the average income of Californians leaving being $125,000 a year, the combination of higher than average incomes in California, still strong tech and entertainment industries in California producing many wealthy people, many millionaires moving back to the state in recent years, and California naturally producing many millionaires has contributed to the unusual rise.

Number of millionaires in California climbs despite loss in population

“It probably seems really against the overall grain, but a lot of rich people still see living in California as better than other states,” said Gabrielle Lewis, an Orange County-based moving coordinator focused on wealthy clients, to the Globe Tuesday. “The trend is usually richer people with families want to move out, but I have seen so many variants here. You wouldn’t believe the number of richer families I helped move out to Austin or outside of Houston or Dallas during COVID who are now moving back after a few years. They hate the weather, they don’t like the politics, or the big factor, their kids and spouses hate it there.”

“But I’ve had to talk with realtors about selling these big houses worth millions they’re moving out of, and they already have a non-investment firm buyer. Sometimes in cash. There’s no shortage of millionaires in California. We seem to create so many here, and like I said, I’ve been seeing a lot of move backs in recent years.”

Juan Skinner, an accountant with many wealthy clients, also told the Globe that quiet millionaires are a big force in California.

“Oh yeah, there is no doubt California is losing people, and all of these big names moving out is only emphasizing that. You know, Elon Musk and others moving back part-time not withstanding. But California is still very attractive for millionaires. Many pay the extra in taxes not just for things like the weather, but because California is so good at catering to wealthier people, from things like schools to certain shops, to even unique opportunities. Texas doesn’t really do that. Nevada really doesn’t do that. I’ve had clients come back from Nevada because of just how awful the private school choices were there.”

“Part of this IRS thing is that California has the unique position of losing overall population while retaining and getting millionaires, so it looks like a bigger increase than it really is, but still, .88% in two years is a lot regardless. And the thing that goes under the radar is just how many of these people are quiet millionaires. These are people who have been saving for decades and, through investments, just slowly accumulated wealth without making a big deal of it. I have clients in LA who have pulled up to my office driving a Toyota they have had for 20 years, who crush soda cans and redeem them and are worth well over $1 million  and who aren’t even 55 yet. Other clients I have have never owned a house and have a beater car, and have a net worth over $1 million.

“And the reason the number of millionaires has jumped up dramatically is in part due to COVID, when so many residents, because of having to stay at home, just put all the money they were making into savings and investments. There’s other reasons too for sure, but I saw that happen a lot. One guy just put all this money he usually spent on vacations or cars into Coca Cola stocks and he made out like a bandit.

“California does have higher wages and a large population, so naturally more wealthier people will be here. But they also have so many quiet millionaires. And many of these people are choosing not to leave because of the opportunities, or advantages, to living here. Plus, also factor in the tech sector and the move backs, and we’re seeing more millionaires. However, what I would like to see is how many making between $100,000 and $999,000 California has lost to against gained. That would be telling in a different way.”

More California exodus figures are to come out later this year.