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Sunday, December 03, 2017
How "Inelastic" is the Demand to Live in California?
Given California's high taxes on those who are well paid, such individuals keep 45% of each dollar they earn. If such a person lived in Texas, he might keep 60% of each dollar earned. President Trump's new tax proposal will further raise the tax price of living in California. If state and local taxes are no longer deductible from federal income, then the tax price will rise sharply. Who will bear the incidence of this tax? Will even progressive voters in California demand a smaller government? Will UCLA and the other public schools suffer? Will the rich now start to move to lower tax areas or does CA's unique amenities keep people here despite the high tax?