California, as has become universally known in recent years, has become a fiscal and political basket case. Take a look at the state as it stands in the spring of 2012: it has a $9.2 billion budget deficit, approximately half a trillion dollars in unfunded public pension liabilities, and a business environment ranked worst in the nation by Chief Executive magazine (in 2010, the periodical referred to the state as “the Venezuela of North America”).
Part of the problem, of course, is the liberal-labor union coalition that dominates Golden State politics, in which the most nefarious force is the California Teachers Association, the hulking union that overwhelmingly outspends any other special interest in the state. Now, in the midst of this economic crisis, the CTA is getting behind Governor Jerry Brown’s proposal to increase state sales and income taxes, a move that would only hasten the state’s decline.
I tackle the issue in my new column for City Journal California. From the coda:
CTA officials contend that Brown’s proposal—an extra quarter of a cent added to the sales tax and up to three extra percentage points on the state income tax, depending on income levels—represents only a modest increase, a cost that the Golden State’s economy can easily absorb. But the margin of the increases is less significant than the final rates they will produce. If Brown’s package passes, California would have both the highest state sales tax in the nation and the highest top income-tax rate. That will only continue to drive economic activity out of the state, a trend that recent IRS data shows cost California $27 billion in tax revenue from 1999 to 2009.
The lesson should be clear: the kind of punitive taxation that Brown’s initiative promotes is precisely what depletes the tax base necessary to finance California’s public schools and pay the salaries of CTA members. Raise rates and you only dim the prospects for public education further.
In a 2009 piece for National Affairs, I noted that, “from 2004 to 2007 more people left California for Texas and Oklahoma than came west from those states to escape the Dust Bowl in the 1930s.” Yet in the intervening years California’s political class has done nothing to improve conditions for those who might be tempted to leave the beauty and cultural dynamism of the Golden State behind for more economically palatable environs. One wonders exactly what natural disaster they’ll have to approximate before the lesson sinks in.