California was once the land of opportunity, but now, like the states of New York and Illinois, it is seeing a drop in population and exodus of business. The Hoover Institute, a conservative think-tank, posits economics was the primary cause of relocation, citing high taxes, burdensome regulations and a high cost of living as compared to states like Texas and Florida.

At the turn of the Century, California had a population of 34 million and prognosticators predicted it would grow to 45 million by 2020. Conditions changed along the way, though, leading to a slowing of growth and then an outright decline in the state during the last few years. Rather than growing, the state began to see an out-migration of people beginning in 2019, when California hit its peak of 39.6 million people. Instead of 45 million in 2020, California had a population around 39.5 million, and they have been losing people since. In 2023 the population now stands at 38.9 million. That’s an out-migration of almost 700,000 people. That number would have been a lot worse if not for a large increase in foreign immigration into the state. 

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The out-migration in California is not solely lower- or middle-income people moving elsewhere for jobs. In a recent report, the Public Policy Institute of California (PPIC) notes, “most striking, California is now losing higher-income households as well as middle-and-lower-income households.”  Losing those higher income people is particularly damaging for the state’s progressive tax structure, in which the top 10% pay 80% of the income tax while the top 1% pays 50% of it. Even losing a small percentage of these individuals represents a great loss in revenue, and trends suggest they will continue to move as the business environment deteriorates and cost of living increases.

The loss in population doesn’t only have an economic impact but also a political one. In 2020, for the first time in its history, California lost a Congressional seat.

It’s not only people moving out of the state, but businesses too. In a recent report, the Hoover Institute noted 352 companies moved their headquarters out of California from 2018 to 2021, with the primary beneficiary being Texas. These businesses include such Fortune 1000 companies like McKesson, Tesla, Oracle and Charles Schwab, as well as any number of manufacturing facilities, offices, warehouses and store locations. 

Some believe California has already entered a death spiral. They see the state further increasing taxes and fees to cover lost revenue from those leaving the state while adding more burdensome regulations, all of which further contributes to the flight of businesses and population from the state. 

Though many California lawmakers believe the last several years represent a temporary slide in population and business, there is no indication the drop will not continue, nor that it wouldn’t become an avalanche in the case of a recession. What may even be more disconcerting is, in the words of the PPIC, that this out-migration “has the power to reshape the state” whereby “the state is no longer a significant draw for people from other states of any age, education or income.” 

Colorado is not California, and our state continues to grow. However, this trend may not continue if our state and local governments follow California, increasing regulations, mandates, fees and taxes that may make it untenable for many businesses to remain. The Common Sense Institute in Denver stated “Colorado’s recent labor and employment and environmental policies more closely resemble policies in states experiencing negative net migration than those in states experiencing growth”.

To bolster their argument the Common Sense Institute estimates since 2018 the total cost of rules and legislation passed totals more than $2.1 billion. That figure does not include recently adopted rules or legislative changes likely to increase that amount by significantly more. As a result, we have seen several businesses take their operations outside of Colorado.

Though many in Colorado may welcome a slowing or even reversal of growth, the challenge is what this may do to the state’s tax base.  

Though Colorado continues to grow, further adoption of policies and regulations like California will likely change this. Instead, we may soon see long-standing Colorado companies consider pulling up roots and moving elsewhere. With states such as Utah (8) and Wyoming (1) in the top-ten of best tax climates in the country on our doorstep, and Colorado at No. 21 and apparently slipping, those states, or somewhere like Texas, which offer a less burdensome regulatory and tax environment, will look much more attractive.  

Let’s hope our state and local lawmakers learn from the mistakes of California and New York who have created an environment where those states stand to lose more people and businesses in the years ahead followed by a difficult reckoning.

Greg Fulton is the president of the Colorado Motor Carriers Association, which represents more than 600 companies directly involved in, and affiliated with, trucking in Colorado.