“To those whom much has been given, much will be required,” California Gov. Jerry Brown told The Los Angeles Times at the kickoff of an event for his Proposition 30 tax hike campaign on Wednesday. Having thus invoked the Gospel to justify his philosophy of a free-spending government, Brown went on to describe his proposed $8 billion tax hike as “an opportunity” for the state’s highest-income earners “to give back.”
Many high-income earners are taking the opportunity, all right … to get the heck out of town before the tax burden gets even higher.
California is already facing a $16 billion budget deficit this year, and Brown’s ballot initiative, under the most generous assumptions, would only close half of that. The measure calls for higher sales taxes on everyone through 2016, and higher income taxes on those making more than $250,000 through 2019.
But when you rely on taxing the rich for such a large percentage of your government’s revenue (California’s top 1 percent already pay almost 50 percent of all state taxes), the whims of the market can be devastating to your bottom line.
California is not the only blue state trying desperately to tax its way back into fiscal balance. President Obama’s home state of Illinois raised its income tax by a record 66 percent in 2011. The result? Another multibillion-dollar deficit in 2012.
In Maryland, Democratic Gov. Martin O’Malley passed a huge tax hike on high-income earners this year. The result? Maryland too is projected to see another year in the red.
Meanwhile, across the Potomac in Virginia, Republican Gov. Bob McDonnell cut spending, not taxes, and Virginia’s budget is now in the black. This week, the commonwealth announced a $448.5 million surplus, a small portion of which will go to performance bonuses for state employees who haven’t had a raise in five years.
Farther south and west in Republican-controlled Texas, taxes and spending have also been kept low. The state has been rewarded with balanced budgets, the most jobs created of any state since the recession began and a below-average 6.9 percent unemployment rate.
Heading back north, no state has done better economically in recent years than Republican-controlled North Dakota, where the unemployment rate is 2.9 percent. Did North Dakota get down to that rate through more taxes and government “investments” in high-speed rail and solar panels? Of course not. North Dakota is booming because the state has let the private sector develop its rich Bakken oil field.
Meanwhile, off the coast of California, millions of barrels of oil, much easier to extract, lie untapped underneath the Pacific Ocean. California’s wealthy environmentalist elite would rather let the middle class suffer through the nation’s third-highest unemployment (10.7 percent) than put their coastal views at any risk.
The three blue states mentioned above all suffer the same fiscal disease: runaway government health care spending. California is expected to spend $12 billion on its Medicaid program (Medi-Cal) this year. By 2016, that number is projected to almost double to $21 billion.
“There’s not a liberal America and a conservative America; there is the United States of America,” Obama said in his keynote address to the Democratic National Convention in 2004.
As the contrasts between red and blue states above show, Obama was dead wrong. Conservative and liberal states have taken very different approaches to the Great Recession. The red states are simply performing much better.
