12 Nov 2017

California: Doing Less Well Than Mexico

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Fifth Generation Californian Steve Baldwin says good-bye to the Golden State, refuting in the process all the liberal boasting about California’s prosperity under Leftism.

[L]iberals like to claim California socialism is working by pointing to the much heralded statistic that “California’s economy is the 6th largest in the world” as calculated by the state’s Department of Finance. Indeed, California’s $2.62 trillion economy is larger than that of France, Canada, Brazil, Russia, and Italy. However, that GDP stat does not factor in California’s cost of living, which is 36.2% higher than the national cost of living. As Carson Bruno writes in Real Clear Markets, “using the cost of living adjusted data from the International Monetary Fund and adjusting California’s GDP data provides a better snapshot of California’s economic standing in the world. Doing so shows that California is actually the 12th largest economy — a drop of 6 spots — and actually puts the state below Mexico.”

Moreover, as Bruno points out, Silicon Valley “accounted for 50% of California’s private industry real GDP growth.” In other words, without a few dozen mega profitable high-tech Silicon Valley firms such as Apple, Google, and Facebook, California’s GDP would be significantly smaller.

However, as economic blogger Richard Rider points out, the aggregate GDP statistic is really not a good indicator of a state’s economic health, especially since one industry appears to be propping up the “6th largest economy” myth. California has over 39 million people, more than any other state, so a far more accurate assessment of its economy, Rider writes, would be per capita GDP as compared to the rest of the country. After adjusting the GDP figures to account for the cost of living (COL), the Golden State ends up with a paltry 37th place ranking within the U.S.A., with a $45,696 per capital GDP. Even rustbelt states, such as Michigan and Ohio, have a higher adjusted per capita GDP. Despite Silicon Valley’s high-tech giants, California barely squeezes past impoverished New Mexico. Rider also reports that when one looks at per capita GDP stats for the rest of the world, California ranks 19th, but those stats don’t factor in the COL data; if they did, California would be even further down the rankings internationally.

One should not also assume that high-tech companies are a permanent feature of California’s economy. Already, the extremely high cost of living in Silicon Valley has, since 2016, caused more Silicon Valley employees to leave the state than it has attracted. With a few high-tech companies having left California for other states such as Virginia, Texas and North Carolina, it’s only a matter of time before this turns into a flood.

But it’s not just Silicon Valley employees fleeing California; it’s productive — and job-creating — citizens from all over the state. As Joel Kotkin and Wendell Cox wrote in the Mercury News last April, “the largest group of outmigrants tends to be middle-aged people making between $100,000 and $200,000 annually.”

Indeed, California has done everything possible to make it difficult for businesses and employers to produce goods and services. California now has the highest state income tax rate and the highest state sales tax rate in the country. Our gas tax rate is fourth-highest, but if you add in the 10-12 cent “cap and trade” cost per gallon, we have the highest gas tax in the country. Based on 2014 numbers, California’s single-family residence property tax is the eighth highest in the country with the median homeowner property tax bill 93% higher than the average property tax bill for the other 49 states. As for the state’s corporate income tax rate, it is also eighth in the country. And let’s not forget our small business tax, a minimum of $800, even if no profit is earned.

Overall, the Tax Foundation ranks California as fifth worse in overall tax burden, but the state is especially hostile to its high earners who start businesses and create most of the jobs. Indeed, the top 1% pays 50% of all state income taxes. Moreover, the Small Business and Entrepreneurship Council ranked California as having the worst anti-business climate in the country; the American Tort Reform Foundation ranks the state as the “worst state judicial hellhole” in the U.S. and the national Chamber of Commerce rates California as having the fourth-worst business climate.

If California is such a prosperous state as liberals claim, why does it have the highest poverty rate in the nation? According to the Census Bureau, the poverty rate is 23.4%, which is 17% higher than second place Nevada. Indeed, while California has 12% of the nation’s population, it is home to 33% of the nation’s TANF (Temporary Assistance for Needy Families) welfare recipients, more than the next seven states combined.

What’s clear is that the producers are leaving the state and the takers are coming in. Many of the takers are illegal aliens, now estimated to number over 2.6 million. The Federation for American Immigration Reform estimates that California spends $22 billion on government services for illegal aliens, including welfare, education, Medicaid, and criminal justice system costs. Liberals claim they more than make that up with taxes paid, but that’s simply not true. It’s not even close. FAIR estimates illegal aliens in California contribute only $1.21 billion in tax revenue, which means they cost California $20.6 billion, or at least $1,800 per household.

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One Feedback on "California: Doing Less Well Than Mexico"

Seattle Sam

Leftists are essentially parasites. Since they are incapable of creating very much themselves, they latch onto the productive and the wealth they’ve created until they kill the host. California has some very strong hosts that foster the illusion that this parasitic relationship is sustainable. Seattle is in a very similar situation. Connecticut used to be, and is now discovering what happens when the host weakens.



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