California is home to the most regulations and the highest tax and public debt burdens in America. It is also number one in the country in poverty. Those results go hand-in-hand and are courtesy of California’s big government mentality.
To attract jobs, ever so occasionally the Democrat run legislature and Governor Jerry Brown apply common sense, by selectively lowering costs for certain businesses. Tesla is the latest apple of their selective eye. The real question is: Why don’t they apply such common sense to the entire state economy and lift California from its troubles?
The statistics about the California economy can be grim. California has among the highest unemployment in the Country and there are still towns with unemployment above 25%. Underemployment is even worse. That has been going on so long that California is said to be number one in the Country in poverty. In other words, the Golden State is rather economically tarnished.
Jobs are hard to come by in many parts of California because California, not only has the highest tax rates in the country, it has the most costly regulations of any state in the Country and has for a long time. Its global warming law alone is a regulatory nightmare faced by employers in no other state – in the world.
In response, for years jobs have been leaving the state for such low cost states as Texas. In the last year, high profile job departures have been announced across the economic spectrum including jobs from Toyota, Occidental Petroleum and even Charles Schwab. Literally millions of people have left for other states in search of jobs in the last two decades. No surprise when you consider California is consistently ranked last in the Country as a place to start a business.
Obviously – or perhaps not so obvious to the Democrats in charge – those regulations, taxes and $1.1 trillion in public debt didn’t just enact themselves. Their passage are all but a pastime for the legislature for the last two decades. Most simply don’t understand Democrat Lt. Governor Gavin Newsom when he says that “you cannot be pro-job and anti-business.” Indeed, when he made that statement to the full legislature in January of 2014, no Democrat applauded.
There is occasional common sense, however, from the Democrats. Faced with such high profile departures and joblessness, the Democrats have now and then passed bills providing tax breaks for certain businesses or industries to entice them to stay or come to California.
The latest high profile effort is an attempt lure Tesla into building a $5 billion battery factory in California with “financial incentives” and regulatory changes. Earlier in the year, Jerry Brown signed a 10-year property tax exemption bill for the existing commercial space flight industry. Before that, tax breaks were renewed by Brown for Hollywood – breaks that began under his predecessor Arnold Schwarzenegger. Most glaring of all, the Democrats seek exemptions at virtually every turn from regulations so they could build their boondoggle high-speed rail project at a lower cost.
According to the Democrat who pushed the space flight tax exemption bill, it would “make California more competitive so that we can create jobs.” The Democrat who pushed the Hollywood tax relief bill said it would create “tens of thousands of jobs.”
Of course, those politicians and bills are relying on the most basic common sense – that by lowering costs, i.e. taxes, companies will have more money to expand, invest, and/or hire employees. That common sense is also one of the most basic economic principles: the lower something costs, the more of it is likely to be purchased or produced.
Indeed, the Ford Fusion outsells Bentleys largely because of price. If they were sitting side-by-side and were the same price – most everyone would buy the Bentley. They are not the same price, however, and the Ford’s lower cost and price means more of them are produced and sold.
That economic cost/price principle has always been true and businesses quite readily use it when it wants to generate revenue. It does so by putting its products on sale. The lower price attracts customers sensitive to price/cost reductions.
On the other hand, rising taxes have chased away production throughout all of history. For instance, taxes on farmland at the height of the Roman Empire were so high, that landowners literally deserted their lands. An incredible 20% of all arable land was abandoned in what is known to history as the Agri Deserti.
Facing their own desertion of employers, Jerry Brown and his California Democrats apparently are smart enough to apply common sense economics – but only part of the time. They offered the space flight industry a 10-year break in property taxes. Interestingly, New York is also offering a 10-year tax break for start-ups. It is obviously a popular number. In response to the Agri Deserti, a Roman emperor also offered free land and a 10-year tax break to Romans if they agreed to farm.
All of that begs the questions: If Brown is coming to the rescue of Hollywood and space flight – and perhaps even Tesla in the name of jobs, won’t lowering costs do the same for all of California’s industries? Wouldn’t more jobs also mean less of a need for government assistance? And even more tax revenue as more employees pay taxes?
The answer to all of those questions is the common sense answer of yes. If only Brown and the Democrats would use it more than part of the time, California’s economy would be humming full-time.
Originally published at Forbes. com.