re: As top earners flee, California sees 25% drop in income tax revenue

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The top earners aren’t “fleeing”, they’re simply buying second homes in other states where there’s no income tax and listing them as their primary residence so they don’t have to pay all the taxes on their CA homes.

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High taxes getting you down? California’s 13.3% rate is the same on ordinary income and capital gain, and there have been several proposals to increase the top 13.3% rate as high as 16.8%. Moving sounds easy, but if you aren’t careful how you do it, you could end up saying goodbye California taxes, and hello to a residency audit. California's tough Franchise Tax Board (FTB) monitors the line between residents and non-residents, and can probe how and when you left.

It pays to know what you are up against, and the burden is on you to show you are not a Californian. If you are in California for more than nine months, you are presumed to be a resident, and more than six months can often cause problems too. If high income tax rates are not scary enough, California also proposed a wealth tax, although so far that did not pass.

Even without any of these proposed tax hikes, paying 13.3% in non-deductible state taxes (after the IRS $10,000 cap) is painful. You can leave for Nevada, Texas, Washington or other no-tax states, but if you aren’t careful, you could end up being asked to keep paying California taxes. In some cases, California can assess taxes no matter where you live.

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