Statistics show that from 2003 to 2014 five million people left from California to other states. In the same time, only 3.9 million people moved to California for permanent residence. Thus, there is clearly a negative balance of internal migration, which indicates that California life has its pros and cons. And the disadvantages here are obviously in relation not only to the cold ocean current.
Let’s see where the problem is. We all know well the benefits of the Californian way of life: a warm climate, a fairly large labor market, Hollywood attractions, Silicon Valley, as well as the sumptuous landscapes that show themselves from Pacific Coast Highway.
Disadvantages of California, to a large extent, one can see only after a person has lived here for several years. Therefore, to make it easier to understand what you will have to face after coming to this sunny state, it is best to group the downsides of the local life.
Why do people leave California?
Those who leave California for permanent residence in another state, we can divide into several groups:
- Former “visitors” who came to Los Angeles or San Francisco a few years ago, but failed to find themselves.
- Young Californians who leave to New York and other states to study or work.
- Californians aged 30-50 years who leave to other states for a better and cheaper life.
The reason for the failures of the first group is easy to understand. Real estates in Los Angeles, San Francisco and San Diego are very expensive. If you do not have start-up capital for buying a house or you are not able to find a qualified job that would allow you to collect large savings, life in the city on the ocean coast simply has no perspective.
Yes, if you have a head on your shoulders, a year after you arrive in Los Angeles you will be able to find a job for $3-4 thousand. Without connections and college diploma you are unlikely to make more than 4-5 thousand. This level of earnings will allow you to rent an apartment with two bedrooms without much trouble and even put aside for rainy day. But then problems arrive for the newcomer.
Buying a house as a newcomer
A family with a stable income in range of $ 5,000-6,000 (given that both spouses work) can even take a house in a mortgage. Although it will be very difficult from scratch. In sleeping areas of Los Angeles, San Diego or Orange County you cannot find a simple house in a relatively peaceful quarter for less than $500 thousand.
The first installment here is usually 20%, and the interest rate on the loan does not exceed 4%. Thus, a young 30-year-old married couple must have at least $ 100-120 thousand. That is in order to take a mortgage for 20 years, while paying a monthly fee of $ 2000-2500. But, the house of the “American Dream” implies the appearance in it, at least, a couple of children. And this means a temporary (and maybe permanent) withdrawal of the wife from work. Then pulling such a mortgage to one husband will not be very easy.
The truth and the myth about taxes in California
Another big problem is high taxes in California. The US tax system assumes that each state itself sets the rate of income tax. In practice, this means that a progressive local income tax is added to the progressive federal tax. Its size, of course, is much smaller, but still noticeable for the family budget.
For example, with an annual income of $ 55,000, a single childless person will be required to pay $11096 federal tax, as well as California tax of $2253. A similar picture can be observed when calculating taxes for a couple with two children with a total annual income of $75,000. And that is the usual income level for a “middle-class” family in California.
Thus, a citizen earning $4-5 thousand a month will have to pay approximately $200 in addition as a local income tax. And this is considering the fact that many other states simply do not have such a tax. For example, in Florida, Texas, Nevada or the state of Washington, you do not pay a local tax at all. In most other states, it is noticeably lower than in California.
The California sales tax is a different subject. It is also one of the highest in the country. With each purchase, you will pay an additional 7.5% as the state tax. But, for example, in the nearby Oregon it does not exist at all. In New York, it is only 4%, in Colorado – 2.9%, in Florida – 6%. The costly California life is noticeable in everything.
Disadvantages of California life
So, let’s sum up the result. Cons of California life are very, very noticeable. The most important among them are:
- expensive real estate (the cost of a house is 2-3 times higher than the national average);
- high state income tax;
- high sales tax.
This means that living in California for the middle class is not so profitable. That also includes those who already have their own home in California, but do not have a high permanent income. The fault of this is the overheated real estate market, which makes it more financially efficient to sell a house in Los Angeles or San Francisco with the subsequent purchase of similar housing in Colorado, Florida or any other state.
For example, an ordinary family owning a house in the San Francisco Bay area, which at the time of purchase 20 years ago was worth $150,000, now can sell it 8-10 times more expensive. This makes it possible, having moved to Florida or somewhere else, to significantly improve the quality of life, because instead of a conventional three-bedroom house they have the opportunity to acquire a much more spacious accommodation of better quality.
Of course, we do not take into account Sacramento, San Bernardino and other provincial areas of California. The property in them is inexpensive, but do not forget that the income tax and sales tax is valid throughout the state, and not just in Los Angeles or San Francisco.
But, if you are not that worried about expenses, it is best to find yourself a perfect apartment in Beverly Hills and experience the whole beauty of California life!