The Golden State isn't worth it

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In America's federal system, some states, such as California, offer residents a "package deal" that bundles numerous and ambitious public benefits with the high taxes needed to pay for them. Other states, such as Texas, offer packages combining modest benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over what it means to get the size and scope of government right.

It's not surprising, then, that there's an intense debate over which model is more admirable and sustainable. What is surprising is the growing evidence that the low-benefit/low-tax package not only succeeds on its own terms but also according to the criteria used to defend its opposite. In other words, the superior public goods that supposedly justify the high taxes just aren't being delivered.

California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau's latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higher in California than in Texas: $10,070 per person compared with $6,858. Only three states and the District of Columbia saw higher per capita government outlays than California, while those expenditures in Texas were lower than in all but seven states. California ranked 10th in overall taxes levied by state and local governments, on a per capita basis, while Texas, one of only seven states with no individual income tax, was 38th.

One way to assess how Americans feel about the different tax and benefit packages the states offer is by examining internal U.S. migration patterns. Between April 1, 2000, and June 30, 2007, an average of 3,247 more people moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas had a net weekly population increase of 1,544 as a result of people moving in from other states. During these years, more generally, 16 of the 17 states with the lowest tax levels had positive "net internal migration," in the Census Bureau's language, while 14 of the 17 states with the highest taxes had negative net internal migration.

Schwarzenegger’s Newfound Fiscal Conservatism

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The Golden State can’t seem to catch a break these days, with a budget deficit that widens by the hour, factory closings, declining exports, state-issued IOUs, and restive labor unions seeking to reinstate higher taxes for California’s beleaguered businesses.

When my last HUMAN EVENTS column appeared in June, California’s deficit was $24.3 billion. Now, three weeks later, it’s $26.3 billion. It may likely be $27.3 billion as State Controller John Chiang (D.) has reported that June personal income taxes were $987 million below Gov. Arnold Schwarzenegger’s May estimates with sales taxes down $154 million. California gets about half of its general fund revenue from income taxes, having the second-highest personal income tax rates in the U.S. after Maryland recently raised theirs to eclipse California in at least one category of economic stupidity. California increased its highest-in-the-nation state sales tax rate from a base of 7.25% to 8.25% beginning April 1, a 14% increase.

At last count, California was going into debt by about $25 million a day. In the fiscal year ended June 30, California went about $10.4 billion in the red.

Meanwhile, a coalition of government employee unions, led by the American Federation of State, County and Municipal Employees California (AFSCME) has filed paperwork to repeal $2.5 billion in tax breaks for business. These tax cuts were enacted to encourage economic activity as part of last February’s budget agreement that also saw the largest state tax increase in U.S. history. The public sector unions have long lobbied to hike taxes, including property taxes and taxes on crude oil production.

As if to signal enough is enough, the Toyota Motor Co. has announced it is preparing to close its New United Motor Manufacturing Inc. (NUMMI) plant and the 4,700 Bay Area jobs that go with it. NUMMI, a joint venture between Toyota and General Motors Corp., has been on shaky ground since GM decided it would back out of its end of the business as part of its bankruptcy reorganization. No doubt, California’s high energy, labor and tax costs, along with its uniquely crushing regulatory burden, played a role in Toyota’s decision.

Go East, young man? Californians look for the exit

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The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.

The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.

California's loss is extremely small in a state of 38 million. And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.

A losing streak that long hasn't happened in California since the recession of the early 1990s, when departures outstripped arrivals from other states by 362,000 in 1994 alone.

In part because of the boom in population in other Western states, California could lose a congressional seat for the first time in its history.