The study comes as Californians face skyrocketing energy bills, layoffs, evaporating personal investments, and a looming recession. According to Anderson, California has some of the nation’s highest state income tax rates, and even the most modest reduction in state income tax rates would generate hundreds of thousands of new jobs and increase investment capital by billions of dollars.

"Whenever the government runs large budget surpluses, legislators congratulate themselves for fiscal responsibility, but it really means that taxes are too high," said Dr. Anderson. "For the last 30 years, whenever Californians have paid more taxes, the legislature simply spent more money. Real fiscal responsibility calls for giving that money back to the taxpayers, not coming up with new ways to spend it. After all, it is ‘their’ money."

Highlights of the report’s findings include

When Californians pay more in taxes, the legislature increases state expenditures. Examination of the California state budget revenues and expenditures from 1968 to 1996 reveals that:

• Every $1 increase in tax revenues (adjusted for inflation) has led to an increase in spending of 75 cents.

• Each dollar of a surplus leads to $9.27 in new expenditures for the next budget year.

Lowering tax rates a mere one-to-two percentage points would lower revenues, but would increase employment, capital stock and investment in the private economy. Using the California State Tax Analysis Modeling Project (Cal-STAMP) econometric model, the study offers two scenarios:

• One Percent Tax Rate Reduction: If the California legislature cut the state tax rate by one-percent across the board, in 2002, it would, in effect, leverage more than $36.8 billion in capital investment, $7.7 billion in new payroll, and 212,963 new jobs.

• Two Percent State Tax Reduction: The second scenario has a slightly more aggressive cut in tax rates at two percent. It would create, by 2002, almost $66 billion of new capital investment, $13.9 billion of new payroll, and 381,333 new jobs.

"If a recession is coming, as many economic analysts believe, state tax cuts would make California more capital friendly and ensure a more robust recovery for California," said Anderson.