California Dreamin'

Lately, state legislators from California have been going to emergency rooms at an alarming rate. Why? Repetitive motion injuries for patting themselves on the back. They finally passed a balanced budget on time. Of course, a new voter-passed law requiring the forfeiture of their pay for tardiness surely had something to do with it. The budget still has some accounting gimmicks and laughable revenue projections but it’s considered a victory for the perennial masochist Republicans as it indeed did not include any tax increases. This outrages many Democrats who say California’s whole problem is because some people just don’t want to pay their fair share.

What they don’t understand is how devastating this mindset is to the very economy they are so desperate to save. Critics say California’s taxes and regulatory environment are driving people out of the state in record numbers. Critics of the critics say, “pfff”. Who’s right? Let’s compare the Golden State to Texas.

California has an unemployment rate of 11.7%. Texas’ is 8%. In fact, 45% of all non farm jobs created in the U.S. during the recent recovery are in that one state. In comparing the overall tax burden, California is ranked 6^th at 10.6%. Texas is 45^th at 7.9%. Taxfoundation.org ranked California’s overall business climate at #49. Texas is ranked 13^th. Before the recession, both states greatly increased the number of jobs. When recession hit, Texas’ # of jobs leveled off while California lost approximately 1.2 million.

The economy has hit this nation hard but business is booming for Joe Vranic, a business relocation coach from Irvine, CA. A frequent guest on major networks, cable news, and NPR, Joe explains how he shows businesses how to leave CA. The top five destinations are Texas, Arizona, Colorado, Nevada and Utah. Why would anyone in their right mind want to leave such natural beauty and perfect weather for Texas’ miles of tumbleweeds and ridiculous heat? Texas has low taxes overall, no income tax, and a less burdensome regulatory system. “…California is such fertile ground that representatives for economic development agencies are visiting companies to dissect our high taxes, extreme regulatory environment and other expenses to show annual savings of between 20 and 40 percent after an out-of-state move….California may suffer more than 1,000 disinvestment events this year. The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars”. Who’s leaving? How about companies like Toyota, Nissan, Facebook, McAfee, and SAIC?

And it’s not just the crassness of money that drives people away. Joe says it is “death by a thousand cuts”. He points to quality of life issues such as bad schools, bad traffic, powerful unions and restrictive labor laws, and policies that create boom and bust housing cycles.

California is just difficult to do business in. Ask Rick Newcomb. He started Creators Syndicate to protect cartoonists and syndicated columnists. “A form of tax madness has taken over Sacramento”, he said. He encountered hostility from the city of Los Angeles who wanted to arbitrarily move them into a higher tax rate. They ruled for him and then changed their mind and made the decision retroactive. They owe $400,000 in back taxes and if they pay it, they will have to lay off ten employees.

The left is not good at creating wealth. It just wants to spread it around. More infuriating is that they don’t seem to care to even try to understand how it all works. California politics is dominated by this anti rich, anti business mindset. It may feel good to hate the rich but it doesn’t help the poor. Given the political dominance of unions and environmental activists, will adults ever be able to step in and make this right? I’m not holding my breath.