Have Policies Broken California’s Economic Engine?

February 2018 – California’s tax policies impact both the individual as well as their employer – it has created a burdensome system which negatively impacts all. As for individuals, California Leads the nation in high tax categories including:

• Highest State Income Tax Sate (13.3%), and;
• Highest Statewide Sales Tax Rate (7.25%), in some cities the combined rate is as high as 10% (the average combined sales tax is 8.25%). This regressive tax impacts all residents regardless of income level.

The state’s regressive gas tax which impacts all residents regardless of income level, recently raised to 41.7 cents per gallon (which is topped by an additional 2.25% in sales tax). But that is not the whole story:

• California gas prices are near $3.50 per gallon, while the rest of the country is paying between $2.00 and $2.50 per gallon.  This is due to the state requirement that merchants sell specially formulated gasoline.
• Due to the nature of California’s sprawling communities, drivers use more gas to get between, home, work, store, and other necessary travels.

In 2017, Chief Executive magazine ranked California as the worst state in which to do business for the 11th year in a row. According to many companies, California could once again be the business engine it once was, if policymakers would cut punitive tax rates, reform the archaic income tax system, lift the regulatory burden from businesses, solve the housing crisis and rethink the minimum-wage hikes. Simple policy solutions are being mired in complex politics.

Between 2007 and 2015, approximately 9,000 companies left California, according to Joe Vranich, president of Spectrum Location Solutions in Irvine. Once these companies make the decision and put California behind them, they typically save between 20 and 35 percent per year in operating costs, Vranich says.

Over the last few decades, millions of Californians have left the Golden State for opportunities elsewhere. According to census data, the Pacific Northwest and fast growing Sunbelt states like Texas, Arizona and Nevada have attracted a disproportionate share of ex-Californians. Do these numbers suggest that California policy makers re-examine their procedure for adopting statute and regulations which may have unintended consequences on constituents and budget revenues?