I have no direct experience in this, but an acquaintance of ours whose startup exited successfully is similarly leaving CA for tax reasons. My light understanding is that CA has some pretty tight rules around how often you can work in CA before you automatically become a resident for the purposes of taxes. If they find out that you’ve worked in CA too much I presume they’ll try and tax your yearly income.
The distinction CA (and other states) make is between being a "resident", "part-time resident", or "nonresident". If you are classified as a resident or a part-time resident, you pay CA income tax on all of your income, even if it was earned from work that happened outside of CA. If you are a nonresident, you pay CA taxes only on the income that was earned from work happening in CA.
It's possible this move might help Musk become a "nonresident" and pay less CA taxes, but I kinda doubt it. The classification of type of resident is based on more than just "official address of your house". It also includes things like where your work is, what banks you use, what doctors you go to, and even what social activities you take part in.
This is pretty common in many states, btw. One time I had to file a tax return to a small city in Michigan because I had a 4-hour work meeting there and they taxed it.
This is why he sold all his properties. He undoubtedly has good tax attorneys and is doing everything required to be a nonresident. I wouldn't be that surprised if he decided to just never set foot in California again.
Yes, actually every state (and most countries) have a similar law. Some people who live and work across state lines deal with this every year on their taxes. I worked part of one year in two different countries, same thing.
Another commenter clarified what I was trying to say; if you become a part time resident of CA then all of your income gets taxed, not just the stuff you earned in CA.
