Wednesday, August 13, 2014

California's Golden Goose Getting Throttled

By Howard Hyde
[Previously published as the 'President's Message' in the May edition of the Newsletter of the Southern California Republican Women and Men.]

We are honored to have as our featured speaker for May 24 Stephen Frank, political consultant and editor of California Political News and Views.

As our once Golden state continues to bleed entrepreneurs, productive citizens, large businesses like Toyota and small businesses too numerous to count, Frank is one of the courageous and persistent individuals who keep us informed and educated in ways not otherwise available. As is stated on the About page of the site: 'The purpose of the CPNV is to provide information the mainstream media either downplays, misleads or denies existing.'

In case you've been asleep for 30 years, California's economy is not what it used to be. A generation ago, California had the sixth most productive economy in the world as compared to other nation states. That position has slipped to ninth, and for anyone with an inkling of knowledge of economics and the indispensibility of free markets, it's not difficult to understand why.

California state income taxes are the highest in the nation, topping out at 13.3% (on top of federal income tax rates). After income is earned, it is taxed at the checkout stand with sales taxes ranging from 7.5% to 10%. The corporate income tax rate - 8.84% -- is the 5th highest in the nation, while the $800/year business tax, imposed without regard to profits or losses, kills companies in their cradles.

Professional atheletes such as DeMarcus Cousins of the NBA comtemplate the half-million extra tax dollars it costs him every year to play for a California team instead of being traded - or moving the whole team - somewhere else, say, Seattle.
That's the tip of the tax iceberg. Here's a tip of the results iceberg: Golfers Tiger Woods and Phil Mickelson bug out. Bank of America and Wells Fargo lay off California workers. Mattel ships 100 jobs from El Segundo to New York. Campbell Soup closes its oldest facility in the country and shifts production to North Carolina, Ohio and ... drumroll please ... Texas. Boeing announces it is laying off 1,000 workers at its Long Beach facility in 2015. Apple Inc. expands domestic manufacturing...everywhere but California. Raytheon pulls out of El Segundo for...Texas.

Not all businesses are leaving for other states. Superior Industries of the San Fernando Valley relocated to Chihuahua Mexico. Apparently a nation under siege from drug cartel wars is a more hospitable place for business than California. Low hourly wages alone cannot explain dumping some of the most productive workers in the world; the excessive costs of employing Californians over and above their wages and salaries has to be recognized.
In all, between 2011 and 2012 Bloomberg estimates a loss of 73,000 businesses in California, a 5.2% drop. The tax and regulatory environment has not improved since then, so there's little reason to expect change for the better.

All these businesses leaving California leaves California with one of the highest unemployment and poverty rates in a nation with an already abysmal average, thanks to the most anemic recovery in 50 years fostered by unprecedented hostility to wealth creation and entrepreneurship emanating from our nation's capital. The unemployment rate might be higher except that thousands of productive, employable people are leaving the state along with those thousands of businesses, for greater opportunity elsewhere.
And the taxes keep coming. Proposition 30, Assembly Bills (AB) 8 and 241, and Senate bills 622, 782, 768 and many more (see Bill's Bills) continue to pile taxes upon taxes.

Oh, and did I mention public employee pension liabilities, the budget deficit, and our children and future citizens held hostage to the most powerful syndicate in the state? Sorry, I'm out of room here.

So are we doomed?

We still have Proposition 13, in letter and in spirit. And there is growing opposition to increased taxes in places that are not Republican strongholds. Richmond is 26% black and voted 67% against Proposition 30, as did 77% of the residents of El Monte, which is 69% Hispanic. Proposition A was defeated in the City of Los Angeles.

These are the small seeds we have to cultivate, which points up our failing and our challenge as Republicans: to reach out and recruit beyond our traditional base into the evolving demographics of our once and future great state.

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