I have lived in California since 1956. When I arrived as a freshman college student, California had the best infrastructure in the nation, the University of California was the best public university and the state had a balanced budget and a part-time legislature. In fact, the last items were connected because, once the state legislature became a full-time career for politicians, the growth in state spending followed rapidly. Now we have the highest state taxes in the country, some of the worst infrastructure and people are leaving. Not everyone is leaving. Illegal aliens are streaming into the state. Legal, tax paying residents are leaving.
Now, 56 year later, we have come to this.
California has the highest state income tax rate in the country (10.3%), while New York State also has a high income tax rate (6.85%), with the combined state and city rate rising to 10.5% in New York City. Their overall government spending totals also happen to top the national charts. And, what do you know, California is $15 billion in the red this year while New York is trying to close a $6.4 billion 2009 budget hole, which budget expert E.J. McMahon of the Manhattan Institute expects to grow to $26 billion over three years.
California hasn’t even passed a budget yet, many weeks into the fiscal year. The Democrats in Sacramento have proposed a series of new taxes on businesses and individuals with incomes above $1 million. Their plan would raise the top income tax rate to 12%, which would be the highest in the nation. They would also repeal a tax law allowing businesses to carry forward losses against future profits.
In August, Governor Arnold Schwarzenegger abandoned his promise not to raise taxes and proposed a hike in the sales tax — by one percentage point for three years, which would bring the rate in many cities to as high as 9%. California taxpayers are fortunate that state law requires a two-thirds majority to pass a budget, which gives Republicans in the legislature leverage to block these tax hikes. They realize that these budget showdowns are the only chance they have to force even modest spending restraint.
So what is happening ?
As for California, its spending soared to $145 billion in 2008 from $104 billion in 2004. Every time the politicians raise taxes, they merely lift their spending by as much or more, and then plead poverty and demand another tax hike during the next economic slowdown.
The “progressives” who dominate politics in these states target the rich on grounds that they have the ability to pay. They also have the ability to leave. From 1997-2006, New York State lost 409,000 people (not counting foreign immigrants). For every two people who move into the state, three flee. Maybe the problem for New York is merely bad weather, not high taxes.
Except that sunny California is experiencing a similar exodus. Over the past decade 1.32 million more native-born Americans left the Golden State than moved in — despite beaches, mountains and 70-degree weather. Mostly the people who have fled are the successful, the talented and the rich.
Why do you think Las Vegas has a million people ? Who in the world would live there if the income tax was not zero ? The sales tax is also zero. Tucson now has a sales tax. Twenty years ago, Arizona had no sales tax but they have a Democrat governor now.
We see the same phenomenon in New Hampshire. Democrats move to New Hampshire to escape the taxes of Massachusetts. Then they vote Democrats into office in their new home state. Pretty soon the taxes rise.
No wonder Arizona residents hate Californians. I have to change that license plate on Annie’s car.