Explaining Southern California's economy

The Phil Mickelson dilemma: Why California can't afford to lose its millionaires

Farmers Insurance Open - Preview Day 3

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Phil Mickelson speaks to reporters following play during the Pro-Am at the Farmers Insurance Open at Torrey Pines South Golf Course on January 23 in La Jolla, California. Will higher taxes drive him and other rich Californians to tax-free states?

Millionaire professional golfer and San Diegan Phil Mickelson got himself into a spot of bogeyish bother during the weekend when he said that in response to rising income taxes on the wealthy in the U.S. and California, he would have to take "drastic action."

Observers interpreted the pronouncement as a pledge to leave the Golden State for the tax-free embrace of Florida to which Mickelson's fellow native Californian, Tiger Woods, skedaddled in the mid-1990s. It also shed some light on why, after being part of an investor group that won the bidding for the Padres last year and bought the team for $800 million, he pulled up his ownership stake.

Florida is pretty much the epicenter of pro golf. Numerous touring professionals, American and otherwise, have pitched their tents there. Mickelson is something of an outlier for choosing tax-addled California and having to add to his private jet flying time when he visits the links of Europe.

He retreated from his comments this week as people question the calculations of how much of his millions he's turning over to the state — he says more than 60 percent, but something like 50 is probably closer to reality.

He still hasn't said whether he'll stick around. 

Californians could look at a rich pro athlete and say, "Good riddance!" That would offer catharsis and address the threat, oft-repeated by foes of tax increases, that the state's wealthiest will flee if the Sacramento goes after their bank accounts.

Who needs ya, Richie Rich?

Well, as it turns out, California is in the awkward position of  needing to tax wealthy residents more — which voters decided to do last November by approving Prop 30 — and needing them to stay put and continue to pay the taxes they were paying before they got hit with more taxes.

In other words, California is overly dependent on the incomes of the wealthy. They contribute far more to tax revenues as a percentage of overall taxation than they did in the early 1980s (15 percent of taxpayers account for a whopping 80 percent of state taxes). When their incomes go down — typically as a results of fluctuations in the stock market — the state's budget suffers. 

Several economists and analysts I've talked with say Prop 30 just doubles down on this problem. Short term, it helps with the state's fiscal problems. Long term, it harbors the potential to worsen an already dysfunctional tax dynamic.

So as much as Mickelson might regret saying anything about tax policy, he did have a point.  Californians might like to shoo away ee outspoken tax critics in the upper income brackets, but they desperately need them to stay. And pay. And keep on paying.

Follow Matthew DeBord and the DeBord Report on Twitter. And ask Matt questions at Quora.

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