But, even if I hadn’t, I got my first clue when I stopped to buy a bottle of water in the airline concourse. Ten percent sales tax! I must be in California, the land of perfect weather… and high taxes.
I have written about the "has-been" state before. A study by the Federal Reserve Bank of San Francisco revealed that California’s non-farm employment growth has lagged that of low tax, low cost states like Texas substantially. The bank’s president said, “Economies of states ranked high on tax-and-cost indexes [meaning lower taxes and costs]… tended to grow faster than the states ranked lower”.
California is not alone as a high cost state. On my recent visit to the Finger Lakes region of NY, I watched CNBC diva Maria Bartiroma emcee the presentation of over $700M in state government grants to developers throughout the state. Presumably, these are projects that did not offer sufficient return to attract private capital. The Finger Lakes (western NY) garnered the largest share, $96M, which was cheered by local business leaders – you know, those free market Republicans who don’t like government interference. Those I spoke with pointed out that the region got none of last year’s freebies. As for the free market? “Well, they’re going to give it away anyhow. At least we got our share,” said one.
New York has the highest amount of public debt per capita in the country, over $13,000 for every man, woman and child who lives in the state. It’s a shame that no one thought of the option of keeping $700M in the state treasury and either lowering taxes or paying off some debt.
Meanwhile, Californians are headed for the exits. Despite high tax rates, state revenues are falling and Spectrum Location Solutions, a company that tracks corporate relocations, has documented over 250 corporate departures last year. In addition, they have cited a loss of more than 15% of financial services jobs in both Los Angeles and San Francisco that have been transferred to other states. In fact, all of our high cost, high tax traditional financial centers – New York and Chicago in addition to the two California cities – are losing such jobs according to a report by Moody Analytics.
Meanwhile, states like bordering Arizona are targeting California companies to convince them to relocate to their low-cost, low-tax state. But, they may be late to the party. The US Census Bureau reported that California’s coastal cities – San Francisco, Los Angeles and San Diego – have lost over 2.3M people people since the turn of the century. The Orange County Register cited high cost of living, high taxes and onerous business regulation as the key drivers of the trend. To make matters worse, the state has passed a new land use law (SB375) that will force people to live in densely populated areas to reduce sprawl and pollution. The law requires housing density of at least 20 units per acre and easy access to mass transit.
The tyranny of a one party government – no matter the party or which government – generally leads to folly. In the case of California, the folly is Blue State utopia.
Well, at least the weather is great.