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California's Anti-Growth Measures

February 13, 2013 3 minute Read by Bernard L. Weinstein

Last week, Governor Jerry Brown and the California Legislature agreed on a budget for the fiscal year starting July 1. This was only the third time in the past two decades that a budget was approved on time. That’s the good news. The bad news is that the state’s sales tax will be increased to 7.75%, while taxpayers earning more than $250,000 per year, who already pay a marginal tax rate of 9.3%, will face a surcharge on their income tax bills. Consequently, Californians will be paying both the highest sales tax rate in the nation as well as the highest marginal income tax rate. Two other anti-growth initiatives are in the offing. As of July 1, the sale of any product derived from the force-feeding of birds to enlarge their livers will be prohibited. Though “foie-mageddon” may have only a minimal impact on California’s agricultural and restaurant industries, it is symbolic of the state’s penchant for pursuing anti-business policies. More significantly, the California Legislature is considering a bill that would impose a moratorium on hydraulic fracturing for natural gas and oil across the state, even though energy companies have used fracking in California for decades without incident. Hardest hit would be the Monterey Shale, which is now producing more light crude oil than the Barnett Shale in North Texas. Against the backdrop of a 10.4% statewide unemployment rate, the energy sector has been one of California’s few bright spots. California can ill afford to further erode its business climate through higher taxes and anti-growth laws and regulations. Over the past two decades, net domestic outmigration has totaled almost four million. That is, four million more Californians have moved to other states than vice versa since the early 1990s. Indeed if it weren’t for international migration, the state’s population would probably be declining. California matters. The state’s entrepreneurial spirit is legendary, and its gross domestic product — larger than that of most nations — still accounts for 13% of U.S. output.  If California can somehow recapture its economic mojo, it will be a major force helping put America back on the path to 4% growth.


Author

Bernard L. Weinstein
Bernard L. Weinstein

Bernard L. Weinstein is Associate Director of the Maguire Energy Institute and an Adjunct Professor of Business Economics in the Cox School of Business at Southern Methodist University. He has taught at Rensselaer Polytechnic Institute, the State University of New York, the University of Texas at Dallas, and the University of North Texas. He has authored or co-authored numerous books, monographs, and articles on the subjects of economic development, energy security, public policy, and taxation. His work has appeared in professional journals as well as the popular press. He earned an A.B. degree from Dartmouth College and an M.A. and a Ph.D. in economics from Columbia University.

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