Brexit and California Business & Politics

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The immediate effect of British voters’ move to leave the European Union will hit California business but a ripple effect could also be felt with the state’s political decisions as well.

No one knows for sure what the long-term effects of Brexit will be but there was extensive handwringing over the economic prospects for the state in the few days following the vote. The unpredictable nature of the unprecedented vote has raised concern. Britain is the second largest trading partner with California after China. In Southern California alone, the Los Angeles County Economic Development Corporation reports that 1,145 British owned establishments employ 55,000 workers with their future status unknown.

Other possible issues: California’s movie business might find filming in Britain more economical with a depressed British pound meaning film projects meant for California and its workers could travel “across the pond.” Also, as California Chamber of Commerce president Allan Zaremberg said in a release, “This will probably make America and the dollar safe havens for international investments, which unfortunately could make California exports more expensive.

California political decisions could also feel a jolt from the Brexit vote when the state’s voters go to the polls in November and beyond.

If the action in Britain results in a worldwide economic slowdown or recession as come economists fear, California’s budget is bound to take a hit. The investing class of taxpayers would not do so well. The state budget relies heavily on the state’s top income taxpayers and benefits from their success with capital gains during good economic times. When the economy plummets so does the budget.

How might voters react to the extension of Proposition 30 or many local taxes on the November ballot in the shadow of an economic slowdown?

If the budget swings downward would the argument that the tax extension is necessary to offset budget loses be more compelling to voters than those who claim that maintaining the heavy burden on high-end income taxpayers will just continue budget woes into the foreseeable future?

More at risk would be local tax measures. Most of these sales taxes, parcel taxes, and property taxes that pay for local bonds come directly from most voters’ pocket. If the economy is struggling won’t voters want to keep more of their own money?

Then there is the interesting political dynamic created by the Brexit model of government separation.

The United Kingdom decided to separate from the European Union. Other EU countries may consider following suit. Meanwhile, Scottish officials are talking about separating from the UK so that an independent Scotland can remain in the European Union.

Will all this talk of government separation spur the separation movements that simmer in California? Calling Tim Draper and his plan for Six Californias that fell short of making the ballot via initiative recently. The website supporting the plan is still up. Or those who have dreamed for seven decades of creating the state of Jefferson in Northern California.

Brexit’s inspired tidal wave will be hitting the California shore. The question is how severe will it be.

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