Although Democrats won almost everything Tuesday in California, the state still can’t go hog-wild with higher taxes, more regulations and fewer liberties for its long-oppressed masses. The reason: Republicans increased their control of many other states and will be instituting tax cuts, reduced regulations and other measures to attract jobs and businesses from California.

And none of these officials is the old Gov. Nelson Rockefeller type of Republicans who are obsessed with increasing government. Rather, the new breed of Republicans wants to get the government off people’s backs.

NPR reported:

“So Republicans were defending a lot of turf with governors, right? They were expected to lose some ground there overall. Because they were defending so much turf, they gained. They picked up three more seats on Tuesday. More dramatic, though – the numbers for the state legislative offices. Obviously, there are lots and lots and lots of them around the country. But it appears – we’ve got some recounts and some close ones still going – but it appears Republicans have picked up between 350 and 375 seats around the country.”

Hey Abbott!

Gov. Rick Perry of Texas has retired for a probable second White House bid. But his successor, Greg Abbott, also is a Republican, and won 59-39. That was a little better than Gov. Jerry Brown’s 59-41.

We can expect Abbott to follow Perry’s footsteps in coming here to grab the jobs California’s oppressive government drives away. Here’s what Abbott wrote just before the election in the Austin American-Statesman:

Texas is the envy of the nation. More than 2 million jobs have been created here in the last 10 years — more than California, New York and Florida combined. That job growth crosses multiple industry sectors and all pay levels, with a higher rate of growth in the two highest wage groups. Half of Forbes’ top ten cities for future job growth are here in Texas, including Austin, McAllen, Dallas, Houston and San Antonio, and McKinney was just rated by Money as the best place to live in America.

Less government, low taxes, smarter regulations and right-to-work laws — not government mandates — these are the pro-growth economic policies that help free enterprise flourish and attract more families and more major employers to Texas every day from states that over-tax and over-regulate.

That freedom also means more Texas entrepreneurs are willing to risk their capital to invest in themselves and others by opening businesses large and small, especially women entrepreneurs.

He gets it: Lower taxes means that entrepreneurs — from Mom and Pop stores to digital nerds — have more money to invest in creating businesses and jobs.

Sure, California has Silicon Valley. It’s great if you have an IQ >180. You can become a billionaire.

But what about the rest of us?

And Abbott’s beliefs are shared by the other GOP governors and legislators across the country.

Whether or not California’s leftist politicians like or not, they’re going to be forced to compete. Now.

Here’s how Gov. Abbott is going to treat “Costellofornia”:

As is now well known, outmigration from California has reached historic highs. Although just 2.6 percent of the large Texas population is now Californian in origin, Texas has received the largest number of Californians from any state in absolute terms. As The New York Times reports, Texas is now home for almost 680,000 people born in California — a figure that excludes non-native Californians who picked up stakes and relocated to the Lone Star State.

Number-crunchers have not drilled down much into the demographic details of the California-to-Texas migration path. But it’s not hard to understand what kind of Golden Staters would be especially drawn to the move.

A successful jump to Texas is aided by factors such as a well paying job that can relocate or translate into the same or better employment. But cultural reasons are among the motives for a self-induced transfer. Californians capable of moving are apt to consider Texas because they are dissatisfied with their own state’s high taxation, high unemployment and extensive government intrusions.

The same holds true if they’re unhappy with the public education system, the legacy of illegal immigration, or the political party that has dominated California politics for years on end.

In short, California Republicans are especially primed to become Texans — and Texas, under Gov. Rick Perry, is especially primed to welcome them.

Playing the inside game

That sort of synergy is clearly no coincidence. But the connection runs even deeper than the cultural and political climate in the two states. The “new” Perry — the more confident, competent figure that emerged from the wreckage of Perry’s bungled 2012 primary campaign for president — is not quite as home-grown Texan as some might believe. Rather than digging down deeper into his home state roots, Perry turned for help to an outsider with a powerful political pedigree — in California.

His name is Jeff Miller, a consultant volunteering a full suite of services to Perry. Miller rose to prominence fundraising and advising former Gov. Arnold Schwarzenegger. He’s among the most plugged-in and well regarded of California Republicans. But, in a sign of the condition of his state’s party politics, Miller is making huge waves — and spending lots of time — in Texas.

As the Texas Tribune reported, Perry’s inner circle feels no shame in heaping praise on Miller. Described as a “perfect extension” of Perry, “the one that has the governor’s ear,” Miller is said to supply the “focus and leadership that was missing” in the Perry camp.

An alternate California

The strange consequence of the arrangement is that Rick Perry 2.0 has become something of a shadow governor of California. Not only is he acting the way a Republican running the state might act; he’s actively recruiting talent and leadership away from the Golden State — and not just in politics.

Jaws dropped, for instance, when Perry succeeded in luring Elon Musk’s SpaceX away from California — where credulous legislators in Sacramento bent over backwards to secure what critics described as the most flagrant kind of crony-capitalist tax deals. Assembly Bill 777 was hurriedly passed to secure a raft of tax exemptions for SpaceX activities, leading The Wall Street Journal to slam state Democrats as Musk’s “Sacramento Pay Pals.” As the Silicon Valley Business Journal reported, the Texas deal will see $85 million and 300 jobs flow into the Brownsville metropolitan area, among the nation’s poorest.

Economy

Similar criticism, however, has not attached to Perry’s creative approach to building the Texas economy. With Miller at the helm, the importance of California to that strategy is clear.

Notably, Miller isn’t the only California Republican putting down Texas political roots. In 2011, Texas became home to former Assemblyman Chuck DeVore, R-Irvine. An influential officeholder representing nearly half a million people, DeVore’s resume included time spent in the California National Guard and in the state’s aerospace industry. He was the model Republican to bail on his home state and make inroads in Texas.

Now, he’s Vice President of Policy at the Texas Public Policy Foundation. In an op-ed at National Review, DeVore summed up the rationale behind his reinvention simply: Just by looking at “the two states’ respective balance sheets,” it was clear that “Texas’s legislature is run by makers and California’s by takers.”

That’s a narrower pitch than many California Democrats will appreciate. But California Republicans in Texas exile don’t want a scattershot approach. They’ve already seen spectacular gains in attracting political and business talent.

Now, it seems, they’re refining their message and their outreach. If the buzz around Rick Perry continues to build, it’s likely  the governor will frame a new presidential campaign around the intriguing idea that Texas shows America what California could be — if it wasn’t run by Democrats.

Instead of dropping off 140 detainees every 72 hours as planned, authorities left Murrieta with full buses, rerouting to a San Ysidro facility near the Mexican border. From there, detainees will be distributed among four San Diego-area locations. What happens next is anyone’s guess.

It’s a striking metaphor for U.S. immigration policy, which has reeled in the face of an unprecedented wave of refugee migrants fleeing terrible conditions in Central American countries including El Salvador and Honduras.

The confusion comes on the heels of another, smaller protest, which scrapped federal plans to fly detained families and children from Texas to Murrieta’s beleaguered station. Those canceled flights were replaced with others, although the status of the new itineraries is also uncertain. The Border Patrol appears to have planned arrivals in El Centro, San Diego and some destinations in Texas and Arizona.

The blame game

California has become the focus of federal plans thanks to the availability of its detention space, which is now in high demand. As many as 80,000 parentless children are expected to flow into the United States this year, deepening a humanitarian and political crisis that has thrown a monkey wrench into both Republicans’ and Democrats’ immigration policies.

Importantly, many of the young migrants seeking refuge do not suffer from the kind of confusion that plagues policymakers themselves. Over half say they have parents or other relatives already inside the country, according to Marc Rosenblum of the Migration Policy Institute. Rosenblum warns that families and children are likely willing to risk deportation and detention because of a 2008 law that requires family members or foster families to host unaccompanied minors until deportation hearings can be arranged — a process that sometimes takes years.

Under pressure from allies and opponents alike, president Obama has vowed to take unilateral action, blaming Congress for failing to pass legislation that could have alleviated some of the current federal confusion. Speaker John Boehner, for his part, says he won’t bring a bill to the floor because Americans don’t trust Obama to enforce the laws already on the books.

A struggling president

Obama’s options, however, are limited — for practical and constitutional reasons. Nonetheless, activists and advocates are already planning to coordinate a political pivot in the run-up to November that would match the president’s efforts on policy. Their enthusiasm is tempered with frustration, however; one of Obama’s first moves was to order expedited deportation for detainees fueling the current controversy.

Obama also faces criticism of his apparent willingness to let the stream of migrants become a flood. At a Washington briefing, Texas Gov. Rick Perry said he has “known about this for years” and slammed the White House for a “failure of diplomacy.” Perry has played something of a Republican good cop to Congress’s bad cop, taking state-level action while framing the problem as a tragedy brought on by the administration’s negligence and incompetence. In a recent op-ed, Perry praised federal officials on the ground for doing their best to cope, lamenting the “very real human consequences of our country’s lax border security and muddled immigration policies.”

The president’s struggle on illegal immigration isn’t restricted to his unilateral orders. The executive branch as a whole is often caught working at cross-purposes, seeking to accommodate more detainees on the one hand and, for instance, demanding California overhaul its planned drivers’ licenses for undocumented applicants. (The Department of Homeland Security doesn’t want those licenses to closely resemble the ones issued to California and U.S. citizens.)

At a time when his public opinion rating on immigration is at its lowest in four years, Obama may not recover on the strength of political blame and executive orders alone. That’s not just a problem for the remainder of his term in office; potentially, it sets up an unwelcome challenge for whichever Democrat seeks to replace him in 2016.

It’s insanely annoying how so many California defenders simply ignore basic facts like Texas is creating more middle-class jobs or that Texas’ Latino and black students do better than California’s in K-12 test scores such as the NAEP.

But it’s also pretty telling that so many Californians who tout Texas don’t acknowledge that for lots and lots of people, California’s lifestyle is so vastly more appealing that they’d rather live in a condo here than a 2,800-foot ranch home there.

I’m in that camp. I reject the idea that Texas is some primitive backwater. But where I live in San Diego, the weather is going to be awesome 330 days a year, not 50 days a year. And if you’re a foodie, I know people tout Austin. It’s not Socal. The 20,000 square miles of California from San Bernardino to the coast to the Mexican border have a staggering variety of great ethnic food. The other I day I had sisig, a Filipino pork dish I didn’t know about until last year, and my life felt more complete. Move over, bacon.

A Texas city that seems modeled on … Irvine!

So any kind of CA vs. TX comparison that skips past the talking points is to be welcomed. Now Joe Mathews has just such a piece in which he writes about his road trip to Texas and how dazzled he was not by the state in general but by a suburb of Dallas that sounds like it was modeled on … Irvine!

Here’s Joe, relating his experience with the company-relocation recruiters of Frisco, Texas:

“What they talked about most was children — and their education.

“They told the story well. Frisco has one of the fastest growing school districts in the country, adding thousands of students every year. Today, nearly a third of residents are kids, and with good reason.

“Texas is full of giant high schools that produce huge football teams and bands. But Frisco, at considerable cost, has chosen to limit its high schools to no more than 2,100 students. The smaller school approach reflects a philosophy that every child in town should be ‘known by name and need.’ This strategy had worked. In a 2013 Dallas Morning News list of the best neighborhoods for public schools in the north Texas region, eight of the top 10 neighborhoods were in the Frisco school district.

“My recruiters emphasized the lengths to which Friscoans will go to support their schools. Voters just approved a $775 million school construction bond (a comparably sized bond in the Los Angeles Unified School District would be more than $20 billion). Despite public criticism of the bond as too big and risky, the measure passed with nearly 80 percent of the vote.

“… such family-centered investment didn’t stop with schools. Frisco has more than 40 park sites and is in the process of turning some of its most valuable land into a 380-acre centerpiece, Grand Park. There are all kinds of businesses and housing development — from gated communities to urban apartments. The town has so many athletics facilities for its people that I lost count.”

Actual reporting, not just blow-harding

Please read Joe’s entire piece here. It’s nice to see real reporting on the opinion pages.

Now maybe Dan Morain can fly to Germany and give a firsthand report on how a government’s overcommitment to green energy has gone haywire.

OK, OK — I won’t get my hopes up.

Charles Schwab is shorting California. The online brokerage, a Fortune 500 corporation, announced recently it is relocating 1,000 jobs from its San Francisco headquarters to out-of-state locations.

“The decision to reduce our concentration in San Francisco is based on many factors,” said Schwab spokesman Greg Gable, “including making optimal use of other locales and the opportunities there.”

Among the locales he mentioned are Texas, Colorado, Ohio, Florida and Arizona. Indeed, following Schwab’s announcement, Texas Gov. Rick Perry tweeted, “Looks like more California jobs coming to Texas.”

Schwab is reducing its concentration in San Francisco, said Gable, to address “the high cost of doing business and cost of living in the Bay Area, as well as our ability to recruit talent in this highly competitive labor market.”

The brokerage will maintain its presence in San Francisco, “for corporate functions,” according to Gable, “but it may be only a matter of time before the company moves its headquarters to a more business-friendly state.”

Just last May, in fact, Charles Schwab was in Denver for a ceremony opening up the company’s new $230 million, 40 acre campus, during which he said he may one day relocate the company’s headquarters from California to Colorado.

And it’s certainly not unforeseeable that Schwab could decide to move its corporate headquarters to Texas.

Opportunities

Not only does the Lone Star State boast both a low cost of doing business – which is very important to corporations like Charles Schwab – and low cost of living – which is very important to employees of corporations like Schwab – the state government provides the “opportunities” to which Gable alluded in the form of business incentives.

That includes the Texas Enterprise Fund and Emerging Technology Fund, which Perry has been able to draw upon the past 10 years  to “close the deal” with out-of-state companies – like Schwab – considering either relocation or expansion to Texas.

TEF, the biggest state fund of its kind in the country, has provided nearly $500 million in incentives since it was created by the Texas legislature in 2003, at Gov. Perry’s behest. It has generated $17.4 billion in capital investment over that span, according to the fund’s 2013 Legislative Report, while also added more than 66,000 jobs to the Texas economy.

ETF was established in 2005 to assist tech start-ups in collaboration with Texas universities. It has awarded roughly $425 million to 190 projects, according to ETF’s 2013 Legislative Report. And that seed money has led to $2.2 billion in follow on funding.

California doesn’t have similar state funds with which to compete with a motivated rival like Texas. And that’s why Charles Schwab may eventually move its corporate headquarters from the Golden State to the Lone Star State.

By Steven Greenhut

California and Texas officials have been having an ongoing tit-for-tat over which of the nation’s two mega-states is the better place to live and do business — something that has become a proxy issue for the broader philosophical debate over the proper size and scope of government.

In California, Democrats control every state constitutional office and have an iron grip on the Legislature, where they always propose new regulations and seek new ways to secure additional tax revenues.  In Texas, Republicans are dominant and Gov. Rick Perry has spent time in San Diego and other California cities luring businesses to the Lone Star State, which prides itself on a low tax burden and more manageable level of regulation.

The rhetoric often has gotten silly, especially given that both states are part of a nation that is highly taxed and highly regulated by the federal government. Most of the differences are around the margins. Nevertheless, Democrats here pretend that businesses aren’t leaving and that the common critiques of $150,000 pension deals for public employees, sky-high tax rates and punitive bureaucracies are a right-wing, Koch-funded plot to turn the Golden State into Bangladesh.

The latest flare-up centers on a Sacramento Bee cartoon in which Perry says “Business is booming in Texas.” It then shows the recent, tragic fertilizer plant explosion in West Texas. Cartoons are rarely subtle, and the message here is that Texas’ lower-regulation climate is responsible for a blast that killed 14 people and injured 200. Gov. Perry penned an angry letter to the editor.

And the Bee, essentially a house organ for state workers, responded with a childish lecture about Perry’s lack of concern for worker safety. It then published a cartoon that made a similar point about the perils of limited government in the context of the tragic Bangladesh building collapse that has claimed the lives of hundreds of people.

San Bruno explosion

I didn’t notice many lefty commentators making similar points about the 2010 PG&E gas explosion in San Bruno. State regulators recently advised against a fine for the utility company even though it was found to have violated dozens of state regulations. The tragic blast came in the nation’s most-regulated state, and involved a regulated utility that can’t sweep a sidewalk without state regulatory approval.

Texas may have relatively fewer regulations than California, but it is also a highly regulated state in a highly regulated nation. The armies of regulators who have descended on the remnants of the fertilizer plant have yet to determine a cause, which doesn’t stop opinion-page editors, cartoonists, and lawyers (several lawsuits have been filed already) from jumping to conclusions about what is to blame there.

Gee, something exploded in Texas so it must be a lack of government at fault, but when something explodes in California it must be caused by corporate greed, even if the explosion came at a government-sanctioned monopoly business. These simplistic arguments divert our attention from productive ways of making our lives safer and better.

Bangladesh is a different story. That tragically poor nation does have many rules and regulations regarding buildings and most other things, but few people follow them. The people there can’t afford to do so. One finds strictly enforced building codes in wealthier nations, but those codes followed the wealth; they aren’t the cause of it. As nations become wealthier they have more money to invest in things such as safety.

When people can barely feed, house, or clothe themselves, they don’t worry as much about things such as, say, second-hand smoke or improper Americans with Disabilities Act regulations. Poorer societies, for instance, are always more polluted than wealthier ones. As they become wealthier, pressure builds for cleaner skies and better water supplies — and for tighter codes for buildings. The answer isn’t to impose tougher rules on poor nations. If Bangladesh adopted Japan’s notoriously tough building requirements, it wouldn’t change anything. People in Bangladesh don’t have the money to rebuild their nation’s stock of buildings.

Reduce poverty

The best way to improve public health is to reduce poverty. Free markets — not government edicts — are the only way to accomplish the vast improvement in wealth that is a precursor to the better environments we all crave. Note that the current building codes are so inflexible that they stifle innovative building designs that will provide further safety and environmental enhancements.

No one I know is calling for “no” government. We all agree on the need for safety regulations. But the most useful ways to improve health and safety stem from competition and from market-based checks and balances (i.e., insurance requirements, rules imposed by lenders and the like) — not from armies of indifferent regulators or from the creation of paperwork-producing bureaucracies more interested in self-preservation than innovation.

Government offers us safety but spends most of its time complaining that it lacks sufficient resources to provide it, no matter how aggressively its budgets grow. How much safety have we lost because we spend so much money on governments that misspend it?

Let’s hope that point gets heard as people make snap judgments about the tragedies at the West Fertilizer Co. and at the factory in Bangladesh.

March 16, 2013

By Josephine Djuhana

NATIONAL HARBOR, Md.—Some conservatives believe a federal balanced budget amendment is an essential reform for fiscal management in Congress. That was the topic of discussion during a panel at the Conservative Political Action Conference (CPAC) at the National Harbor in Maryland.

Grover Norquist, the founder and president of Americans for Tax Reform, moderated the discussion and began with a simple two-part plan for Washington to balance the budget—by “never raising taxes” and “not spending so much of other people’s money.” He also highlighted Paul Ryan’s recently unveiled budget, which rolls back entitlements and federal power, and balances the budget without raising taxes. The budget, according to Norquist, was not only a way to reduce the size of the federal government by reforming, but also a “step in the right direction to enact tax reform.”

Rep. Andy Harris, R-Md., said in reference to the Senate, “They don’t believe that the spending is the problem, and they don’t believe the debt or the deficit is a problem.” Anyone who has read Paul Krugman would know that to be the case. And even President Obama recently charged that he was not interested in a “balanced budget just for the sake of balance.” With much concern mounting over the nation’s ever-growing $16 trillion deficit, it’s no wonder that conservatives are now looking for ways to force Congress to create a balanced budget. But Democrats in Washington don’t seem to seem to agree on the need to halt spending, as the budget proposal from Senate Democrats, according to Norquist, “raises taxes and never balances the budget.” The budget plan includes $1 trillion in tax increases and a new $100 billion stimulus plan. It also increases spending by 60 percent over the next ten years, leaving an additional deficit of $500 billion ten years from now.

“That’s why you need a balanced budget amendment, because in the end, [Washington] can’t restrain itself,” Rep. Harris said. “And we certainly can’t guarantee that future Congresses will restrain themselves.”

The panelist consensus was that outside intervention is needed in order to limit spending by Congress. “Unlimited debt is the fairy dust that makes unlimited government function,” said Nick Dranias, a director at the Goldwater Institute.

There are two methods to ratify a constitutional amendment, but the path through Congress does not seem promising, as it requires a two-thirds majority approval in both houses of Congress. The state method is the alternative.

“In the state method, there is a critical check and balance on federal government,” said Derrick Khanna; he’s a former professional staff member for the Republican Study Committee. “It is unfortunate that this method has never been used as our Founders intended.”

All that is needed is a three-fourths majority of states to ratify a constitutional amendment. “States across the country are pushing for a federal balanced budget. First it was Florida, in 2010, and then it was New Hampshire, last year,” said Khanna.

Effects of a balanced budget amendment

There are certain fears that with a balanced budget amendment, members of Congress could force a tax increase in order to ensure that revenues keep up with expenditures.

But Arizona, which has a balanced budget requirement, has used this obligation to its benefit by rejecting Obamacare. When Governor Jan Brewer attempted to raise taxes in order to fund Obamacare in the state, the state legislature shot the proposal down, as state tax increases require a two-thirds majority in order to be ratified.

The balanced budget requirement also seems to be working for the state of Texas.

Texas Governor Rick Perry was also present at CPAC, and delivered short remarks on his state in comparison with the federal government.

“Texas has a balanced budget and a surplus, and is creating more jobs than any other state in the Union, and we’re doing this with a part-time legislature that meets for only 140 days every other year,” said Gov. Perry. “Our legislature—they come in and they pass laws, and then they go home and live under those laws.”

He then emphasized that states should be “the laboratories of reform.”

But instead, we have a federal government that mandates and dictates regulations to states, what with Obamacare and the expansion of Medicaid, the proposed increase in the minimum wage and more. Many conservative allies have fallen to money from the federal government and special interest groups, and we have reached a point where it seems that nothing can stop Washington from continuing on its taxing and spending binge.

“Washington doesn’t worry about how to pay its bills; they just charge it to our grandchildren’s accounts,” said Gov. Perry. “But in Texas, our constitution requires a balanced budget.”

Gov. Perry emphasized that Texas’ “number one ranking when it comes to job creation” is directly correlated to having “balanced budgets and one of the lowest tax and spending rates in the nation.”

Framework for a balanced budget amendment

During the panel, Nick Dranias highlighted the Compact for America, which is a formal amendment to balance the budget and has additional inclusions that work to prevent outright taxation by Congress in order to balance the budget.

But the path to Congressional discipline on the fiscal matters will be an uphill battle, yet many activists would like to see Congress reexamine itself and its practices when it comes to balancing the budget. As government expands, liberties decrease, and the best way to curb government intervention is to take away its ability to spend recklessly.

By John Seiler

Long Beach still sometimes is called “Iowa Beach” because so many people from that state migrated West from the snow and the corn fields to the beach and the sun. Now, they could be going the other way:

“DES MOINES, Iowa — Gov. Terry Branstad said Monday that he’s heading to California in an effort to get West Coast businesses to consider setting up shop in Iowa. Calling California a ‘happy hunting ground,’ Branstad said he’ll travel there this week, but the Republican declined to name the businesses he’ll be courting. 

“‘What we do, we call on companies that already have an investment here and we call companies that are prospects,’ Branstad said, arguing that Iowa’s efforts to reduce commercial taxes should make it attractive. ‘Their plan is if it doesn’t move, tax it'”

I wish Republicans would come up with some new cliches. But I suppose that’s asking too much.

His trip won’t make as many headlines as the recent business-poaching trip of Texas Gov. Rick Perry. And whereas Texas offers some obvious advantages over California, Iowa does not.

Iowa’s top state personal income tax rate is 8.98 percent, compared to 13.3 percent in California. Probably not enough of an improvement to lure millionaires from Pacific Palisades to Dubuque. By contrast, Texas offers zero percent.

The top state corporate income tax rate is 12.5 percent in Iowa, 8.84 percent in California and zero percent in Texas.

Earlier this year, Branstad said he would no longer pursue getting rid of Iowa’s corporate and personal income taxes. Instead, he’s going to focus on cutting property taxes.

Well, California’s property taxes already are fairly low thanks to Proposition 13. Although property prices here are triple those in Iowa and most other states because of our severe restrictions on building.

Bottom line: Iowa doesn’t offer enough incentives to attract many businesses and people to leave California. The Hawkeye State is the Golden State with bad weather.

The amber waves of grain still are no match for the golden beaches.

By Chriss Street

Gov. Jerry Brown was just forced to admit reality. His supposed $5 billion boost in January tax collection from Proposition 30, which increased sales and income taxes, was really just an early collection of taxes.

Two weeks ago, California state revenues were up by $4.3 billion in January over Brown’s proposed 2013-14 budget proposal.  At the time, I said the “strong performance” was due to two one-time events that took place by December: a delay in collecting $1 billion in Christmas season sales taxes and $3.3 billion of taxes on capital gains, dividends and bonuses paid in January from the prior year.

A week before my report, the supposedly independent Legislative Analyst’s Office said the state was on track to collect $5 billion more in tax revenue in January than estimated in the Governor’s budget.  I said that this revenue would come from high-income earners cashing out investments early to beat the Congressional fiscal cliff settlement that raised federal income taxes by 3 percent and capital gains taxes by 5 percent.

What Jerry Brown failed to admit was that sales taxes have crashed by 27 percent, or $582.7 million, as Prop. 30, Cap and Trade and other onerous regulations are finally beginning to convince the rich to take their businesses, income and shopping somewhere else. While at the same time, opportunists such as Texas Gov. Rick Perry have been attempting to lure corporations to leave the state.

And it now appears the sales tax collection crash in January is a precursor of an even bigger crash coming by April.  Brown made huge promises of payback for union bankrolling of Prop. 30.

The result: California is looking towards another crisis.

Reaganomics

During the Prop. 30 campaign, the Howard Jarvis Tax-Payers Association and other opponents had warned that, because of what is referred to as the Laffer Curve, there would be a direct inverse relationship between a rise in the rate of taxation and the resulting government revenue collected.

Ronald Reagan proved this phenomenon by cutting tax rates with the Tax Reform Act of 1986, which caused the higher economic growth that generated higher tax collections and eventually balanced federal budgets in the late 1990s.

Brown’s promised that, if voters approved the Prop. 30 tax increases and he cut spending, his 2013-14 state budget would achieve a budget surplus of $851 million — the first surplus in a decade.  I pointed out that Brown cited a mantra he performed every night before bed while studying at a Zen monastery in Japan in the 1980s, “Desires are endless, I vow to cut them down.”

But yesterday, Brown began negotiations for new contracts with the public-worker unions that represent 350,000 state workers — engineers, administrative staff, librarians, corrections officers and more. The contracts are due to expire this summer.

Even though the average state worker’s salary in California is $70,777, nearly $16,000 higher than the national average, these unions expect a big pay raise for providing the millions of dollars for campaign ads and thousands of campaign foot soldiers that caused the passage Prop. 30.  Brown has already promised to “restore” $817.6 million in pay in the current budget, offer $502.1 million of 2 percent to 5 percent pay raises next year and add coverage for higher health care costs.

He indicated executive branch salaries also will increase nearly 10 percent, to $15.7 billion.  None of these increases includes the $10 billion increase I estimate that is required to keep the current state pension system solvent.

The state of California is now facing an even bigger crisis than before the passage of Prop. 30.  It’s now feeling the economic impacts of the highest state sales tax at 7.5 (even higher in come counties), top income tax reate of 13.3 percent and second-highest gasoline tax at $.67 per gallon.

As was well publicized, Perry recently engaged in private meetings with business leaders in the San Francisco Bay Area and Los Angeles Basin to lure high-tech companies to the low-tax Lone Star State. In an interview with the San Jose Mercury-News, he criticized California’s regulatory environment, and said Austin, Texas, is poised to become the “next Silicon Valley.”  He told the paper, “Twelve years ago, California wasn’t looking over its shoulder.  They’re not looking over their shoulder now — they’re looking at our backside.”

CHRISS STREET & PAUL PRESTON
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