Democrats on Tuesday proposed billions in tax increases on businesses and high earners to help bridge California's budget shortfall.
The article goes on to say that the proposal won't pass, because tax increases in CA require a 2/3 supermajority, by constitutional mandate. The Democrats know in advance that the Republican minority won't vote for the increase. This sort of craziness goes on all the time in my former home state.
That the proposal won't pass is beside the point. Suppose the Republicans got weird and voted for it; the results would be disastrous. If you want to destroy the economy in a state, increase the taxes "on businesses and high earners."There is no requirement for businesses to be headquartered in CA. There is no need for many high earners to live in CA. If the legislature makes living there punitive enough they will leave. Jackson Hole is full of wealthy folks who make it their home because WY has no state income tax.
Some months ago this blog provided a link to a study which showed that the states with the lowest tax rates were growing fastest, had lowest unemployment rates, etc. Conversely, the states with the highest tax rates were losing residents, losing jobs, losing investment, and gaining deficits.
This is not rocket science. Folks like to keep most of what they earn and will go to where that is possible. Taxing the rich sounds good to the not-rich but doesn't work in practice. The rich mostly didn't get rich by being stupid about money.
If legislators in CA really wanted to do something about the economy they would lower taxes on businesses and the rich, attracting them to CA. States need to understand that they operate in a marketplace where they compete with other states for investment and jobs. CA can only sell sunshine when other factors (i.e., taxes, regulations) are essentially equal, which they currently are not.
