The Calexodus: Why You Need to Leave California Now

Dateline: Belgrade, Serbia

For months, I have been urging people to wake up and realize how terrible things are becoming in California. I lived there early in my career and it was terrible then. 

Things have only continued their downward spiral. 

California has some of the highest tax rates in the world and they continue to find creative ways to get more out of you and make it hard for your business to survive. 

If you’re a 7- or 8-figure entrepreneur, you might be paying 43% of your hard-earned money in taxes to both the US and, more specifically, California.

You don’t need to. You can leave California and go where you are treated best. 

People are finally starting to realize this. A “Calexodus” has begun as the wealthy have started to leave California in droves. Even Elon Musk recently left California for the more tax-friendly Texas. It’s just not worth staying in California.

If you’re in a similar situation, you should leave California now. 

If you have not yet joined the Calexodus, let me share with you why you should and why you should do it now.

In this article, I will discuss the following:

  • How California is Trying for the Wealth Tax Again
  • California’s Entitlement Issue
  • If You’re Going to Move, Then MOVE
  • There Are Other Beaches
  • A Few Places that Do Treat You Well
  • The Nomad Tax
  • The Deeper Issues to Learn from California

California is Trying for the Wealth Tax Again

Assembly bill 71 is something we’re just learning about as it is coming out. It basically picks up the pieces for the failed wealth bill from earlier in 2020 and calls for a tax on millionaires and billionaires to foot the bill for California’s incompetence in failing to run their state. 

It would also go back 10 years and look at wealthy people who have left the state of California and retroactively tax them.

This is a historical act that goes against the rule of law in many regards. 

Unfortunately, the creation of wealth taxes and retroactive taxes is something you’re going to see more of in the US and other western countries. The US set the precedent for that with a retroactive tax in 2017, but now California is at it again. Last time, they didn’t come close enough to passing the bill in the assembly, but now they’re trying again.

We don’t have all the highlights of bill 71 as it’s still in the committee stages, but here are some of the highlights we are aware of:

It will have a wealth tax on millionaires and billionaires. So, if you make a million dollars or more, you will be taxed at a higher rate — I always point out that this doesn’t mean that you have a million dollars. California already has some of the highest tax rates at 13.3%. They’re going all the way up to 16%. One out of every $6 you make is going to go to state taxes — not all your taxes, just the ones at the state level. Joe Biden is also talking about increasing taxes on the Federal level so you have that to look forward to as well. If you are self-employed, you can be paying close to 60 cents on the dollar in taxes.

The bill also plans to increase the percentage of capital gains tax rates and make more capital gains taxable.

It will eliminate the stepped-up basis on inheritance tax. More people will be paying at higher rates.

On top of all of this, they want to raise the progressive corporate tax rates to even higher levels. They want to raise tax rates on individuals and businesses.

The interesting thing will be to see their creativity (i.e., incompetence) in implementing all this. To pay 16% of your income in state taxes and then to see it so terribly mismanaged is frustrating — that’s probably an understatement.

I lived there for six months over 12 years ago and I remember driving from beautiful, well-managed Arizona and crossing into California and feeling like I was driving on the surface of Mars, the roads were so badly managed.

But why is California proposing this new wealth tax (that they won’t call a wealth tax)?

They say it’s to end homelessness. Now, we could all get behind that commitment and support it. It’s a growing problem in the western world and it’s sad to see it happening. Most people would support something like that and that’s why they use it as the excuse. 

I am a successful entrepreneur and I like to give to charities. But I like to see how my donations are being used. If I give my money to an agency buying a winter coat for an 8-year-old child, but they spend $60 to get that coat, then I take my money elsewhere. We can find coats for less than $60. I like my money to be used efficiently. With the government, you don’t have that ability to choose how effectively your money is used.

Do you think if they get this bill passed that homelessness is going to be fixed? If you give an extra $50K a year for the rest of your life through this wealth tax, the corporate tax, and more wherever they can squeeze it out, is that going to solve homelessness with these people in California running the show?

I highly doubt it.

Leave California and It’s Entitlement Issues

The comedian Adam Carol talks about California as being the prom king or queen…when they turn 50. Your day in the sun is over but you are still clinging to the fact that you were the prom king or that you beat the Thunderbirds in high school in a rousing victory back in 1997. 

California was the king of the hill, so apparently, the government thinks that it is now entitled to do whatever it wants.

That sense of entitlement overrides good business and fair treatment. I don’t want to deal with entitled people in my life and I don’t want to deal with entitled governments and countries. 

The United States, and specifically California, have become that.

That’s one reason you need to leave California now.

It’s problematic for a government — as is the case in many western countries — to think that they are the number one place where everyone wants to come and that no one will consider leaving no matter how terribly you’re mistreated or how much they tax out of you. 

And it seems that lawmakers in the Golden State don’t think anyone is going to leave California. That’s why they feel they can go back 10 years to find if there are more taxes you need to pay. 

If you leave, they will go back and find you. California did this three years ago with people who were overseas and people actually had to pay taxes retroactively. I discussed this recently in an interview with Fox Business that Congressmen actually taut this as a sort of Robin Hood tradition to bring back expat money from overseas and really the only way to escape all this taxation is to renounce your US citizenship.

I have been saying for years that you were going to see more of this and now, here it is. They’re going to do anything by hook or by crook. 

The Franchise Tax Board in California is the most aggressive tax collection agency on the face of planet Earth, bar none. The IRS is at the kitty table in comparison and they’re not exactly a joke.

They take your money because they feel entitled to it.

California is living off their brand name, but tech and startup companies don’t need Silicon Valley anymore and can see more success if they leave California. But until the Calexodus gains more steam, the Californian government will continue to make a living off of misinformation.

Escape California’s Name Brand Trap

California is like a food product with nice shiny ads and brand recognition so everyone eats it, but it’s actually filled with GMOs, MSG, and all kinds of terrible stuff that can ruin your health. Nobody knows about it or does anything to change it, but it’s the worst thing you could possibly put into your body.

Even folks overseas buy into this name brand trap.

I often talk to people in China about how they’re going to pay tax on their worldwide income if they move to the US and get a green card. Once they do, that big business in China is open game for the IRS to tax. They will tax your business in China if you live in the US or become a citizen.

But nobody believes me. 

These countries are living off of marketing. People think it can’t be that bad. But it is!

Countries that have the brand name are using it to any and all advantages. Western countries are much more judgmental about it. They’re not looking for good feedback about what is and is not working for its citizens. They feel that if you don’t like it, then you’re a traitor and you should get out. 

Places like Singapore don’t really care how you feel about Singapore, they’re just raising their prices. If you want to immigrate there, then it’s $5 million. Why not? If you can pay it, come on in. You’re from Afghanistan,? If you have the $5 million, as long as you look clean, come on in.

California is no different. Instead of MSG and GMOs, California is planning to add a death tax and an inheritance tax where everything over $3.5 million will be taxable. 

The interesting thing is what they plan to use the money for. 

If you read the fine print, they just want to create another government program to monitor the level of inequality. They feel they can solve the inequality issue by taxing inheritance at 40% and redistributing that money as they deem fair.

Any of these things are the camel’s nose under the tent.

If you look at the very first federal income tax introduced a little over 100 years ago at 3%, everyone said “We can handle 3%.” Now, look at where it is today. If you say this new wealth tax, death tax, or inheritance tax is just for guys with $3.5 million or more, how long do you think that’s going to last?

Those guys are going to call me and get out.

They leave California!

I don’t know how California has 42 million people living in it. California is financially sinking, but they are going down swinging. They will try to tax every last cent they can get from you and no money is safe—even that retirement nest egg you’ve been building for years. 

People with money are leaving California. You will start to see the demographics in California change. All the people with money are moving out.

You won’t ever find me in California. If you’re a 7- or 8-figure entrepreneur in California, come talk to me and I can help you find a place where you will be treated best.

And I’ll give you a hint: It’s not California!

There are Other Beaches in the World

In trying to figure out how California still has so many people living there, I have to ask if anyone has told these people that there are other beaches in the world.

Even other beaches in the US are nice. Florida can be a surprise, as much as people rag on it. It’s not too expensive, the beaches are nice, the water is warm and the food is great.

I own an apartment in Montenegro in Southeast Europe, across from Italy and the Adriatic. There’s a beautiful yacht club — the only platinum yacht club — down the street from my house. My thing is, I don’t expect that property to have substantial capital appreciation compared to other places I own around the world. 

One of my employees, who is ethnic Albanian — kind of the opposite culture of Serbia and Montenegro — went to the south of Albania and they have beautiful beaches. They haven’t developed yet. You can pay $500 for a meter of property almost right across the sea. 

The minute they do develop those beaches, my property in Montenegro is going to have some competition. 

South of where I live in Kuala Lumpur, there are beautiful beaches with great resorts. I’ve heard many say after visiting there that they can see why people move here. And it’s just continuing to improve.

They’re inventing beach resorts all over the world. Every year, there’s a new beach resort. Don’t get stuck thinking you can’t leave California because of the lifestyle it offers. It’s not the only place in the world with amazing beaches.

If You’re Going to Move, Then MOVE

Fear of the unknown has kept many from expanding and exploring new options in new places. 

I had an Australian client and friend a number of years ago who was telling me about Australians. He said he comes from a city in Australia where they were literally taught that if you invest in a different city in Australia, you’re probably going to get scammed and robbed and it’s all going to go downhill.

A different city, literally a couple of hours away. 

Obviously, there are a lot of misconceptions that I’ve learned over the past 12 years as I’ve worked to build and expand my network around the world. For one, it’s not about hiding money – there is a lot of disclosure required these days. It is about going where you’re treated best, protecting and diversifying your assets, and legally reducing your taxes.

But it’s also about going where you’re treated best on a lifestyle level. I would like to let you in on a little secret: there’s not a great difference between what people call the first world and the third world.

Earlier this year, we had the chance to travel around Malaysia and even four hours out of the city in the middle of nowhere, they have some of the best roads I’ve ever seen. I think it’s one of the world’s hidden gems.

I’ve had clients and employees who have lived or traveled in Eastern Europe in places like Ukraine and Serbia who said they have better roads than you would find in Detroit — for sure better than you would find in Cleveland and other parts of the US and the western world. 

Just as I mentioned in my interview with Fox Business recently, I would urge people to consider that if they’re already planning on moving from a high-tax state in the US to a low- or no-tax state — a place where they are treated better — why not take the plunge and move where you are actually treated best?

Say you’ve decided that you need to get out of anti-business, high-tax California (finally!) and so you’d like to go to Texas, Nevada, or Florida where they are more pro-business with their low to no-tax on income. There is a lot of work associated with moving. 

If you’re already going through that work, why not make the move to where you’re treated best. You may be escaping California’s state taxes, but you are still paying the bulk of your taxes to the federal government. 

You don’t have to! 

There are many countries that, unlike the US, have many pro-business tax policies and will welcome you with open arms to bring your wisdom, entrepreneurial spirit, and business to their country. They recognize the benefit you bring to their country and they’ll treat you well.

So, if you’re already planning to move, make a move that will make a real difference.

A Few Places That Do Treat You Well

Leave California for Barbados

Do you want breathtaking beaches and low taxes? Then leave California and head to somewhere like Barbados.

I like people, businesses, and countries that understand where their bread is buttered and they welcome you rather than repel you. There are also cultures that can better match what you value in life. 

Here are some countries that welcome people who want to work, develop, and bring an entrepreneurial spirit, as well as value certain traits that might connect better with how you want to be treated.

Recently, Barbados has talked about a one-year visa for people that want to work online, further removing any gray area remaining that they want you to come and work.

Estonia has led the economic resurgence of the Baltic area by encouraging an entrepreneurial environment. It has become the tech gem of Eastern Europe by opening up to e-residency and providing an environment of economic freedom. They want you to come and they’ll treat you and your business well when you do.

Georgia — a country I talk about a lot — has kind of pulled back on its tax friendliness a bit recently, but, like most places with a low-tax system, they are actively working to attract wealthy people and their business expertise. They also have a 360-day tourist visa policy. They welcome you and treat you well.  

I have also spent a lot of time in Cambodia. I found it to be one of the most fascinating markets in Asia. It’s probably one of the few frontier markets left in Asia that are available for investment to foreigners. It still has a lot of potential. You will trip over business ideas there.

There were a couple of guys a while back in Cambodia who started a coffee shop called Brown Coffee. They were so successful in saturating the market that powerful coffee companies like Starbucks and Coaster Coffee now have to kneel to their market power. 

Phnom Penn, Cambodia has one of the best Starbucks in the world today because there was no other way for Starbucks to compete with these guys who had the simple idea to start a coffee shop in the country long before the competition arrived.

Similarly, a man and his wife started a little ice cream shop called Blue Pumpkin near the Angkor temple complex. It has expanded all over the country. Now, they have a multi-million dollar ice cream business. 

You can’t do that in the US right now. 

You’re not going to compete with Dairy Queen by starting with a food cart on the street. Maybe there’s some sort of niche you can get into but everybody is doing the same thing.

Malaysia is open to pretty much everybody on earth. They’re welcoming.  If you look at the numbers, they’ve developed to a level where they are wealthier than many European countries. And nobody knows about that.

I spend much of my time in Malaysia. Some of the things I like are that it’s obviously pro-business, it’s one of the safest counties in the world right now, and their culture is not overbearing. 

Malaysia did a great job handling the pandemic, as well. This year, travel has obviously been slowed down, but the Malaysian government controlled the spread without being overbearing. It’s not their culture to be overbearing. 

Obviously, every culture is different. Living among different cultures actually helped me become more self-aware in life because the friction of “you” vs “their” culture exposes the things that you really believe and helps you learn new things. Everyone is different. Everyone has a different perspective. 

The Nomad Tax

Now, I want to be clear that no place is a utopia. There’s never a perfect place or situation. The idea that everything in your country is terrible is wrong. It’s just as wrong as the view that everything your country does is right. In finding where you’re treated best, you need to know what you want and what you can live without. 

There are times when I think it would be nice to order stuff off Amazon and have it delivered 45 minutes later. That is the nomad tax though. If I’m going to buy something online, it’s not quite as fast or easy. E-commerce is in a lot of countries now, but it’s still developing.

I had a credit card sent to my mailbox in the US and had to have it mailed to me here in Malaysia. I had to spend $75 to have it shipped DHL 2-day. It seems ridiculous to pay that for something small, but that is the nomad tax.

But if you make $1, $2, or $5 million a year and you can go from whatever you’re paying in California right now — which is insane — to a place where the cost of living is lower, the taxes are lower, and the people are nicer, then it might be worth paying the $75 to get your mail. 

For me, the tax savings and the lifestyle improvements are what make it worth it. People are much nicer and there’s a lot more development that you wouldn’t expect. In the end, I feel like I’m getting the better deal, the nomad tax included.

The Deeper Issues to Learn from California

Leave California San Francisco

Are you ready to leave California behind? Once you make the move, you won’t regret it.

The real reason I’ve been talking about millionaire and wealth taxes lately is that we have been reading the real boring reports that come from think tanks about these tax issues. And what they’re showing is that the real issue is that people in the western world just hate wealth. 

In California, three out of four people feel it’s okay to tax the wealthy at higher rates. It’s an easy group to pick on. 

We have to be careful though because someone in California who makes $1 million a year might only take home $40K. With the high cost of living in California, you could have someone who makes a million that actually doesn’t have much in savings.

So, what would I do about this? 

Here at Nomad Capitalist, we focus on going where you’re treated best, not just where you’re treated better. Moving to Arizona or Texas would be a good start, but should be a temporary move. 

With Joe Biden coming to power in the US and people like Elizabeth Warren and Bernie Sanders having record-level attention within the democratic party, you will see some of these liberal policies focused on raising the federal tax of successful people eventually become a reality.

It will happen in Canada and other western countries. There is a mandate from 75% of these western populations to do that. Hatred of wealth is going to become more and more acceptable.

If I were in California, I would get rid of my California infrastructure, set up my business where I can get pro-business tax rates and treatment, and live in a place like Puerto Rico where there is a very tax-friendly rate. Then, I would invest the money I make to get a second residence and build a Plan B for when the US starts to come at me with a retroactive tax. 

When the decision comes to either pay $100K in taxes for the rest of my life or go where I can pay a very low tax rate, I’m heading overseas to where I’m treated best. 

I deal with tax rates from around the world and California is literally the worst. They don’t even play by the rules. I would definitely get out of there! 

And while you’re moving, ask yourself what would be best. Put that into perspective and put it into action. You can pay lower taxes, have a better quality of life, and do it all legally.

Andrew Henderson

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