As one who has lived in frigid Chicago and then on the East Coast for most of my life, I've always asked myself this question: How do you screw up California? There must be no place on the planet with more natural and geographical advantages than the Golden State. Beautiful mountains, beautiful beaches, sunshine most every day, 70-80 degrees, natural resources, world-class universities, Hollywood, Silicon Valley, a rich immigrant culture. California girls.
This is about as close to heaven on Earth as you get – or it should be.
But for the past decade or so it hasn't been. We saw a tiny sliver of the problem this past week: After being headquartered in Torrance for half a century, Toyota has had enough of California's antibusiness, antigrowth policies and is packing its bags and moving to Plano, Texas, where the contrast couldn't be greater.
Toyota is not alone in fleeing California. Over the past five years, at least 250 major companies have moved out of state, taking with them tens of thousands of jobs. Small businesses are exiting even faster. There is a only a minirecovery in parts of California, for sure.
There may be less here than meets the eye. A Internal Revenue Service report released two weeks ago examines where tax filers are moving to, and from, and how much money they take with them. In 2011, California was a net cash-exodus state. Taxpayers who left took more money with them than taxpayers who came in brought with them. That's been going on for a decade.
Most states with great weather – Florida, South Carolina, Arizona – were huge magnets for people with money. Not California. The good news is that the Golden State is not nearly the calamity that New York, New Jersey, Illinois and Ohio are – according to the new IRS data. Those states are almost literally bleeding to death as their wealth flees.
But one thing should concern Californians who love their state. There is a new line in America: Texas is the new California. If you want to get rich, you don't go West, you now go Southwest. Over the past five years, as California has lost jobs, Texas has gained 1 million jobs. And the Toyota relocation is just the latest black eye.
The progressive culture of governing in Sacramento is the root of the problem. Businesses are treated in Sacramento as if they are a criminal class – not as the backbone of the economy. In my new co-authored book, “The Wealth of States,” we explain why Texas does so much better than California and point to three policies that put the Golden State at a huge competitive disadvantage:
The income tax in California is the highest in the nation.
The Golden State is not a right-to-work state, meaning workers can be compelled to join a union against their will.
California is a thicket of regulatory burdens that are nearly the most onerous in the nation. Just one example: The renewable-energy mandates and the state's cap-and-trade policies are driving up electricity costs and risking brownouts.
My liberal friends argue that taxes really don't matter and that people are willing to pay more in taxes to live in California. Millions are willing, for sure, but there is a growing number who aren't. Americans aren't immune to the personal financial consequences of their decisions to choose a new state of residence. A new website, SaveTaxesByMoving.com, finds that even middle-class families can save hundreds of thousands of dollars by retirement age by moving from a high income-tax state, like California, to a zero earned income-tax state, like Tennessee.
Just so people don't think I am cherry-picking the data here, there are nine states without an income tax, and, except for Alaska, in tax year 2010, every one of them gained income from the other 41 states that have earned income taxes.
Taxes do make a difference, and California could make an amazing jobs recovery if it would only strive to be an average income tax state – not numero uno. The way to get more tax revenue from rich people is to get more rich people, not drive them away.
The economic upside for California is amazingly high, and the good news is that almost all of the state's problems are correctable errors. They aren't a result of a catastrophic hurricane or earthquake or tsunami. These are man-made disasters. So California needs the courage and the wisdom to replace the people who created the disaster. And then, as the old pop song goes: Nothing can stop us now.
- Staff opinion columnist Stephen Moore is chief economist at the Heritage Foundation.
Originally appeared in the Orange County Register