High taxes push people out of California

High taxes push people out of California

On Election Day, California’s voters approved Prop. 30 by a margin of more than 700,000 votes. Championed by Gov. Jerry Brown, this ballot initiative will ratchet up income and sales tax rates over the next few years. It’s expected to pull in some $6 billion in new funding for public schools and public safety.

But by making California’s already inhospitable tax climate even worse, Prop. 30 may end up accelerating the ongoing exodus of people from the Golden State.

Since the 1990s, more people have been leaving California than arriving here from other states. After nearly a century as a place where dreams were made, this is now a state that Americans are fleeing en masse.

In a new report for the Manhattan Institute, researchers Tom Gray and Robert Scardamalia demonstrate just how serious a problem California faces. Between 1960 and 1990, the state’s population swelled as about 4.2 million people came here from other states with hopes of building a prosperous life. It was a time when Horace Greeley’s famous admonition to “go west, young man” could be uttered without irony.

But in the last two decades, the state has lost that feeling of promise. About 3.4 million residents uprooted themselves and moved elsewhere in the United States.

California has gone from a domestic migration surplus to a massive deficit.

And the reasons behind the great relocation are not surprising.

First off, there aren’t enough jobs in the Golden State. Right now, California’s unemployment rate is at 10.1 percent — far higher than the national average. People are fleeing to states where jobs are more plentiful.

The No. 1 magnet state for Californians is Texas, which has weathered the recession especially well. Before 2007, California’s jobless rate was similar to that of Texas.

But by July 2010, the unemployment rate in the Lone Star State was a full 4.3 percent lower than that in California. Californians struggling to make ends meet in a sagging economy have little choice but to go where the jobs are.

It’s not just Texas, though. From 1993 to 2010, California lost to other states a net 758,938 taxpayers (based on the number of tax returns), comprising more than $41 billion in lost aggregate gross income (AGI) from those taxpayers.

California’s jobs crisis isn’t due to bad luck. It’s the ineluctable result of poor policy decisions made by California’s leadership.

California has spun an endless web of regulations and put an increasingly burdensome tax regime in place. For eight years running, it’s been ranked the worst state in which to do business by Chief Executive magazine.

And — wouldn’t you know it — the Top 10 destination states for those fleeing California all have more business-friendly tax climates, according to the Tax Foundation.

California can only blame itself for this mass emigration.Fortunately, these self-inflicted problems can be solved.

For starters, there’s no reason the state needs a corporate income tax rate that’s 25 percent above the national average. Labor unions shouldn’t have such overwhelming political clout that anti-business legislation is routine in Sacramento. And the state tax code needs to be simplified and regulations need to be streamlined.

For California to once again be a place where Americans can reliably prosper, state leaders need to enact pro-growth reforms. But as long as California voters continue to approve tax hikes, this state will continue down this lackluster path, smothered under the weight of bad policies and hemorrhaging millions of residents.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.