As we Californians head to the polls today to vote on ballot propositions related to the state’s finances, Arthur Laffer and Stephen Moore remind us how the Golden State lost its luster:
Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies — old and new — have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.
Basically these economists argue–and have the data to prove it–that when a state increases taxes, particularly on the “rich,” the more those wealthy individuals flee the state for one with lower taxes, sometimes taking their businesses with them.
After Arnold Schwarzenegger was elected in the 2003 recall to reform a state government that had grown by leaps and bounds under then-Governor Gray Davis, the incumbent Governor did little to undo the damage that Democrat had done. Between 1999 when Davis took office and 2003 when citizens started organizing to recall him, the state had hired nearly 40,000 new full-time employees. The latest figures (from 2007) show only a modest decline in that number.
While friends who work for private companies across the state report receiving pay cuts, state employees have not experienced similar salary reductions. Because of their influence, the public employee unions have succeeded in preventing the state from treating them as would a normal enterprise facing decline revenues; they all but control the government in Sacramento.
Voting “Yes” on these propositions would do nothing to lessen their stranglehold on the California legislature.
We don’t need higher taxes to ensure essential services. We just need fewer bureaucrats to administer them. Indeed, these very bureaucrats, in administering the regulations passed by our nanny-state legislature, help stifle the innovation and entrepreneurial activity which once made California the envy of (and model for) the nation.
The more they regulate, the less productive are those who generate the revenues necessary to pay their salaries.
Higher taxes will only drive away those who have not already fled for states with a smaller tax burden.
By voting “No” on Measures 1A-E today, California voters will send a strong message to our elected officials in Sacramento. We don’t like the way they’ve been running this state. And we don’t want pay to fix their mistakes.
So, let’s see real budget reform instead. And let’s see state our bureaucrats face the same challenges as do their private sector counterparts. And our state legislators make the tough choices that families across the state have had to make in these tough economic times.
ADDENDUM: Mark Tapscott offers a more detailed explanation of why Prop. 1-A is such a bad thing.