The Daily Caller

The Daily Caller

California dreamin’

Photo of Chuck DeVore
Chuck DeVore
Vice President, Texas Public Policy Foundation

Lately, some Californians have taken to telling themselves that Texas, one of seven states without a personal income tax, can afford not to tax productive output because of its high property taxes and its oil and gas tax revenues.

This rationalization can’t even leave the gate, much less fly.

California’s tax burden is so much higher than Texas’ — 42 percent higher, to be precise — that even if it eliminated its income tax system, its residents would shoulder a heavier tax burden than their Texan counterparts. That’s stunning when you consider that California has the nation’s highest state income tax bracket (13.3 percent).

It’s true that Texas’ property taxes are fairly steep — the 14th-highest in America. But, contrary to popular myth, Texas’ oil and gas severance taxes amount to less than 4 percent of its state and local taxes.

The bottom line is that Texas has no income tax because its government is comparatively frugal, living on 7.9 percent of state income and ranking 45th in tax collections, while California’s government consumes 11.2 percent of state income, making it the fourth-most-taxing state in America.

And while Texas lawmakers, with Governor Rick Perry urging them on, mull a range of tax cut proposals, California lawmakers are moving in the opposite direction. Sacramento just enacted a massive tax increase, is expanding the costly and ineffective Medicaid program under Obamacare, has an accumulated debt of $848 billion that may reach $1.1 trillion if pension funds return merely realistic returns, and remains stubbornly committed to building a government-run train from the Bay Area to Los Angeles at a cost of $58 billion.

What could go wrong?

To pay for all of this government, Gov. Brown and his allies have a few ideas, including levying new taxes on oil and using California’s cap-and-trade law as a tax, rather than an exchange.

The oil tax hike is an interesting idea. California’s Monterey Shale formation, which is largely under private land, likely holds more than 15 billion barrels of oil, or about two-thirds of America’s shale oil reserves. Unfortunately, Golden State politicians aren’t likely to easily allow the oil to be brought to the surface; they’re considering curbs on fracking and other unreasonable environmental roadblocks. As much as California’s elected class craves oil revenue, they’ll soon find that it’s hard to tax what isn’t produced.

What does California have to show for its high taxes?

Not better schools. Texas has a higher high school graduation rate than California and its students do better on national standardized tests, both overall and broken out by race and ethnicity.

Not a more robust economy. According to the Census Bureau’s comprehensive measure of U.S. poverty, from 2009 to 2011, California had 42 percent more people living in poverty as a share of its population than did Texas. In fact, when California’s high cost of living and high levels of welfare spending are taken into account, California had the highest percentage of residents living in poverty in the nation: 23.5 percent. That poverty is in part a consequence of California’s persistently high unemployment rate — California has had one of the nation’s highest unemployment rates since the beginning of the recession. Texas’ unemployment rate has been at or below the national average for 75 consecutive months.

California doesn’t seem to receive much in return for its high tax rates.

Texas, already a low-tax state, is looking for ways to enhance prosperity by cutting taxes and limiting the growth of government.

The contrast between Texas and California couldn’t be greater.

Chuck DeVore, a former California lawmaker, is vice president of policy at the Texas Public Policy Foundation and the author of “The Texas Model: Prosperity in the Lone Star State and Lessons for America.”