It is oft said that if you want a glimpse of America’s future, look to California. The home to Hollywood has led the way in national trends from the first no-fault divorce law and the permissive Therapeutic Abortion Act of 1967 (both were signed into law by Ronald Reagan) to the great Proposition 13 property tax cut of 1978. It was California’s populist tax revolt, stoked by then-former Governor Reagan, which reframed the debate about the proper size of government and helped propel Reagan to the presidency in 1980.
Today California offers a different vision of America’s future: high taxes, burgeoning government debt, crushing regulations, rapidly growing welfare rolls, soaring energy costs, and a heavy lawsuit burden have taken a grinding toll on the once-Golden State.
From 2004 to 2010, as a state assemblyman representing almost a half-million Californians, I had a front-row seat in what was to be California’s great comeback under Gov. Arnold Schwarzenegger. It wasn’t to be. Schwarzenegger was elected in an historic 2003 recall with the promise to “cut up the state’s credit card.” Not only did Schwarzenegger not rein in California’s spending, he presided over a growth in government spending and debt even more rapid than the torrid pace set by the Democrat he replaced, then capped it off with the largest state tax increase in U.S. history combined with a cap-and-trade law that could increase energy costs on the average California family of four by $9,330 per year by 2020 — equivalent to a 48 percent increase in state and local taxes.
California’s current governor, Jerry Brown, has two goals: a train and a tax.
Appropriately recycled into office, making him at once California’s oldest and youngest governor, Brown has gone all-in on a money-losing high-speed government train costing $65 billion the state doesn’t have. If it’s ever built — I co-authored the losing ballot argument against it — unemployed Californians will be able to ride from San Francisco to Los Angeles and pay twice as much as a Southwest Airlines ticket for the privilege of taking more than double the time to get there.
As bad as it is in California, it may get worse. Proposition 30 is on the ballot this November. If passed by the voters (it’s ahead in the polls), Brown’s tax will vault California’s already high income taxes to the highest in the nation: 21 percent ahead of current leader Hawaii.
California’s ruling class has crafted a government-centric public policy: We the People is now Of the Government, by the Government and for the Government.
According to the Tax Foundation, California’s state and local government consumed 11.8 percent of personal income in 2009, compared to the national average of 9.8 percent. By stark contrast, Texans pay 7.9 percent of income to support state and local government — making the Lone Star State the 45th-most-frugal state in the nation. Put another way, the cost of government in California is 49 percent greater than in Texas.
California’s large government pays for thousands of regulators who dutifully churn out thousands of new regulations, telling business owners that they’re not welcome. In fact, a 2007 study commissioned by the California legislature to determine the cost of regulations calculated that they amounted to a de facto tax of $134,122 for every small business in the state. The regulatory burden fuels an ongoing exodus of productive talent to more welcoming states (see below).
California once benefited from net domestic in-migration as millions of Americans packed up from the Rust Belt and moved south and west. But since 1990 the U.S. Census has tracked a reversal of fortune. More Americans leave California than move to it — a net of 2 million in the past decade alone; Texas being the number one destination for former Californians. And why not? Texas has seen a 16 percent increase in jobs since 2000 while California’s job market has just recently climbed back to break-even. I became a new Texan in 2012 (below is a photo of me switching out my California plates for Texas ones).
California’s middle class and entrepreneurs have fled while government pay and benefits have soared, giving rise to a new privileged class of government union employees.
Alongside this California nomenklatura is a soaring number of people on public assistance. With one-eighth of the nation’s population, California has one-third of America’s welfare recipients.