California boasts some of the world’s finest golf courses, but apparently that’s not enough to keep the pros happy. Phil Mickelson, winner of multiple championships, hinted at his intention to ditch the formerly Golden State because of its high-tax policies. The golfer’s comments prompted fellow champion Tiger Woods to say that taxes were what drove him out of California in the 1990s. The “sock it to the rich” policies ultimately result in lower tax revenues, bigger deficits and a declining standard of living as the wealthy pack their bags for more welcoming places.
California does have stunning landscapes, great weather, top universities, fabulous beaches and a lot more going for it. Because of this, bureaucrats in Sacramento believe they can charge residents a premium for the privilege of living there. Gov. Jerry Brown recently raised the top levy to 13.3 percent on those earning a million dollars a year, and he substantially boosted rates for six-figure earners as well.
Plenty of wealthy Californians are willing to pay this premium. Thousands of companies, including giants such as Google and Facebook, put up with the high taxes and onerous regulations because they depend on the high-tech talent base in such places as the Silicon Valley. Still, even wealthy liberals have to decide whether it’s worth it if taxes keep going up. It’s too early to tell whether the newly imposed 13.3 percent rate will be the tipping point, but anecdotal evidence suggests that pulling up stakes is on a lot of California minds.
States with low or zero tax rates, like Florida, Nevada and Texas are increasing their appeal — and their population of taxed-out former Californians is growing. According to a recent Manhattan Institute study, factors such as regulations, real estate costs, labor costs, electricity rates and union power can spur the urge to relocate. The report cited census data showing more Americans have made the exodus from California since 2005 than have moved in. During the three decades prior to 1990, by contrast, 4.2 million more Americans moved to California from other states than left it.
While some bitter Left Coasters may be thinking “good riddance” to businesses and the rich, fewer businesses mean fewer jobs and lower wages. Fewer high-income earners mean less revenue to pay for basic government services. This leads to a declining overall standard of living for everyone. In 1959, California’s per-capita income was the third highest of any state. By 2011, its ranking had slipped to 18th, according to the Bureau of Economic Analysis. At the same time, California is expanding social welfare programs that pull in “takers” from other states and from other countries, who are making the state ever bluer. Beneficiaries of such programs typically vote for even higher taxes and more onerous regulations, which in turn drives out more of the “makers.”
Phil Mickelson and others considering pulling up stakes need not feel guilty about depriving the state government of tax revenue. That’s because so much of it is wasted on overly generous pensions for overpaid public employees rather than spent on essential government services. Until the public-sector unions are brought under control, California’s vicious tax circle will continue.
The Washington Times
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