America's housing market appears to be recovering. Home prices inched up 1.1% in April compared to the previous year, according to a new report.

Unfortunately, Fresno's market is lagging behind, with home prices increasing at half that rate. Fresno County's monthly sales volume has fallen 2.4% over the past year alone.

Elsewhere in the San Joaquin Valley, the situation is even worse. In Hanford, prices have actually decreased 2.5% relative to April 2011; in Visalia, they're down 0.7%.

California's housing market won't come back until lawmakers scrap the state's stifling tax and regulatory regime. And the best way to do so is by instituting a low-rate flat-tax system. Nothing would do more to revive the economy, attract people into California, and rescue the housing market.

California has long enjoyed high home prices -- and suffered from vicious bubbles. In 1968, the median price for a home was about 16% above the national median. By 1989, it was double the national figure. Prices dipped briefly in the 1990s, but the state's housing market generally outperformed the rest of the country's.

The 2000s saw an unprecedented uptick -- or, as we later learned, a massive bubble. At the peak of the market in May 2007, the median home price in California was an astonishing $594,530.

Of course, it all came crashing down. By 2010, double-digit drops in housing prices befell several parts of California. The median home price in Fresno County is now half the national median.

The decline in home prices has had profound repercussions for the rest of the economy. Home construction is a vital source of new jobs. Every house built creates and supports positions in manufacturing, utilities, insurance, and other industries.

California's housing woes aren't like those elsewhere. Home prices have oscillated wildly, primarily because the stacks of regulations with which builders must comply create a significant lag between the recognition of a need for new homes and their actual construction. That delay leads to a misalignment between the supply of homes and real-time demand for them.

The housing pipeline can't be turned off quickly. New homes may continue to stream onto the market after consumer demand for them has evaporated.

At the same time, California has ratcheted up taxes -- driving potential homebuyers out of the state and discouraging new ones from entering.

Between 1992 and 2008, the state lost 869,000 taxpayers. Of the top nine states absorbing ex-Californians, the average personal income tax rate is 3.44% -- nearly two-thirds less than California's.

California's corporate tax rate isn't doing the economy any favors, either. At 8.84%, it's one-quarter higher than the national average. That high rate discourages businesses from expanding and creating jobs -- jobs that would be filled by potential home-buyers.

The data support the contention that California's high tax rates have compelled people to leave. During the extraordinarily high tax year of 1994, California lost nearly 450,000 people to other states. And in 2010, the last year of a 0.25% surcharge on each income tax bracket, 100,000 folks hit the road.

Californians don't have to go far to find friendlier tax climes. Nevada and Washington have no income tax, and Oregon doesn't levy a sales tax. The combination of those two forces -- a glut of houses and an exodus of potential buyers -- has yielded the state's stagnant housing market.

The fix is obvious -- policymakers must roll back the state's excessive tax burden.

A 5.8% flat tax on both personal incomes and corporate sales -- in conjunction with the elimination of other regressive taxes -- would raise as much money for the government as the current system without any of its growth-strangling distortions. The tax burden for those of modest means would decrease.

The resulting economic expansion would increase and stabilize revenue for state and local governments. And it would provide in-state consumers -- and entice out-of-state consumers -- with the cash needed to rejuvenate the housing market.

California's economy will not perk up unless the housing market recovers. Fundamental tax reform is the answer.

Source: http://www.fresnobee.com/2012/06/13/2872432/arthur-b-laffer-our-no-1-priority.html#storylink=misearch