The Wall Street Journal reports that California is on the decline

The Wall Street Journal published a good assessment of our state entitled the “decline of California” which reminded me of a northern CA electronics manufacturer our corporation once represented. At that time I met with the CEO of that firm whose sales were declining. The manufacturer’s Board felt the best solution was to increase pricing on all of their custom products while retaining the top brass and their sizable compensation packages. Although I cautioned him that this action will chase his customers to local and out of state competitors, he had the front door keys and moved ahead with their plan. I don’t have to paint the picture. We lost long time customers and shortly thereafter the firm, on the verge of bankruptcy, was acquired by one of our customers in the San Fernando Valley. I once drove by the  plant to see a padlock on the front door.

Raising taxes to fix our current shortfall is not the answer to our budget deficit.
Quoting from the Wall Street Journal it reads in part:
“The tax increases will continue to chase even more productive people out of the state. For at least two years, the sales tax would rise by one percentage point to 8.25% and the income tax by 0.3% to a top marginal rate of 10.56%. These will both be the highest statewide rates in the nation (see chart).

Do these taxes hurt business? Ask Hollywood. Film makers are threatening to flee to avoid the state’s high costs, so to keep them in Southern California the deal offers $500 million in tax breaks for producers. Rich liberals like Rob Reiner, who love higher taxes on other people, get a sweetheart tax break and everyone else pays more.

It’s no surprise that most CEOs we talk to, many of whom live in California, say they’d be foolish to build another plant in the state. California’s budget crisis is the inevitable result of runaway liberal governance, and the state’s voters will keep paying for it until they reduce their tax burden and adopt more radical spending controls.”
The Journal report states: “It’s sad to watch. The Golden State — which a decade ago was the booming technology capital of the world — has been done in by two decades of chronic overspending, overregulating and a hyperprogressive tax code that exaggerates the impact on state revenues of economic boom and bust. Total state expenditures have grown to $145 billion in 2008 from $104 billion in 2003 and California now has the worst credit rating in the nation — worse even than Louisiana’s. It also has the nation’s fourth highest unemployment rate of 9.3% (after Michigan, Rhode Island and South Carolina) and the second highest home foreclosure rate (after Nevada).”

The entire article can be found at the following link:

http://online.wsj.com/article/SB123491737158404543.html

Gilbert comment. Governor Schwarzenegger and CA Legislature. Be careful what you ask for as you consider any tax hikes. I have seen and lived through the backlash.


About Larry Gilbert