By David L. Bahnsen
Thursday, April 01, 2021
Of all the angles one could take to critique the present
state of leadership in California, perhaps none is as simple and objective as
the basic fact of exodus.
Fiscal considerations are subject to idiosyncratic
catalysts that skew the data for periods of time (to either the positive or the
negative). Unfunded pension liabilities speak to a future problem to result
from present malfeasance, but they still allow people to conclude, “Well, maybe
that works out better in the future than it sounds now.” (It won’t.) The
widening economic divide is felt to be a problem only by those on the losing side
of it. A lack of cultural cohesion is not just “not a problem” for many on the
left, but an explicit aim. California is a mess economically, fiscally,
socially, educationally, and culturally, but in each category there exist
sufficient can-kicking options, or at least prima facie “spin” opportunities,
to soften the realities of what is taking place in the Golden State. But there
is one basic, objective reality that is impossible to spin away — people
are leaving in droves.
I suppose that some states or pockets of the country in
various periods, likely cyclical ones, could be susceptible to mass exodus.
Weather conditions, quality of life, scenic options, pace, energy, educational
opportunities, job-market dynamics — there are always reasons that could lead
one to leave a certain place for another. But every one of those issues was
a magnet to California decade upon decade — not a deterrent to
coming or staying. Come spend a day with me in Newport Beach sometime and tell
me that the weather is the reason people are leaving this state. You can rest
assured that no part of California will receive a failing grade for its
weather.
To leave a spot often branded as paradise for its warm,
sunny, and consistent weather, there has to be a catalyst. Dreamers long
flooded into California because of an entrepreneurial culture that was
real and palpable. From Hollywood to Silicon Valley, from the Central Valley
to San Diego, from downtown Los Angeles to the Inland Empire, whether in entertainment,
technology, agriculture, sciences, big business, or small business, there was
a dream associated with being in California. It was
aspirational. It was a spot of infinite opportunity that also had the Pacific
Ocean and 70-degree weather. It was no accident that California grew as it did,
and no accident that such profoundly important businesses grew here, came here,
were founded here, and flourished here.
But, alas, it has been no accident, either, that all of
this has wrenchingly reversed. The weather and the dreams have not changed. But
the tax rates, the regulations, and the cultural climate have. And over two
decades marked by a highly conscious policy shift, the Left has helped to
reverse the New Year’s Day dynamic of folks around the country watching the
Rose Bowl on ABC, wondering why they are shoveling snow off their driveways
when those lucky SOBs in Pasadena are bathing in sunshine with a view of the
San Gabriel Mountains. It takes a lot of work to reverse a force like that, but
the work was done, and that force has been reversed.
There is no one factor that has provoked the exodus. In
fact, nearly every person I have ever talked to who has left the state was
willing to swallow one of the major disadvantages of life there. Perhaps they
didn’t like the heavy tax burden but were willing to bear it in exchange for
the various advantages that life there gave them. The inexorable increase in
cost of living was a bear but acceptable up to a point. The regulatory burdens
were unwarranted but tolerable if one could just manage to do whatever it was
one aspired to do.
No, what caused and continues to cause the exodus out of
California is not tax burden, or regulation, or cost of living, or housing
prices. Rather, it is the burden, and regulation, and cost
of living, and housing prices, and more.
The 13.3 percent top tax rate for California’s highest
earners is the highest state rate in the nation and is obnoxious. The state’s
“middle class” tax rates are far and away the highest in the nation as well, also
obnoxiously. One making $58,000 a year in California is in a marginal tax
bracket (9.3 percent) nearly double that of someone in Arizona making over
$500,000 a year (4.5 percent). When you look at the $116,000–$250,000 level
that a middle-class, dual-income family would likely make in California, the
9.3 percent marginal tax rate is higher than almost every single marginal state
rate in the country.
But there is no evidence that the declining appeal of
staying in California is simply a tax protest. On top of being
walloped by taxes, one takes fiscal hit after fiscal hit — property taxes that
average $5,000 per year for a lower-end middle-class home with no frills and
that can easily approach $10,000 per year for the most mundane of tract homes.
Utilities, car registration, insurance, and education expenses are all in the
top decile.
One is being asked to pay a lot more to live in
California, and yet education results are abysmal, crime rates are unacceptable
(the state has the 14th-worst rate of violent crimes per capita), the
electricity grid is a debacle, and the job market has hollowed out. (The CEOs
of great California companies have maintained homes in Menlo Park or Palos
Verdes; recent factory or plant expansions of the companies have gone to Nevada,
Arizona, and Texas.) The value of living in California has declined but the
cost has not been correspondingly reduced; in fact, it has exponentially
increased. A business cannot survive when it raises prices while simultaneously
making a worse product. Neither can a state.
California made a choice to adopt a cost structure
perfectly tailored to the needs of its public-employee unions. (The same could
be said of Greece.) Policy-makers have made a conscious decision to make no
effort whatsoever to diversify the state’s revenue base. The extreme revenues
that highly specialized companies in Silicon Valley have earned bought legislators
time as they came out of the great financial crisis. But the dysfunctional
dependency on a technology tax base in the go-go 1990s and the subsequent
dot-com bust taught Sacramento nothing. Today, the state depends on a revenue
base narrower than ever before, even as debt levels, pension-funding needs, and
infrastructure needs are at code red. One need not ignore the blessing of high
capital-gain revenue when Big Tech flourishes, but to assume that the gravy
train will continue is perilous.
For the leftist ideologues who have brought about the
exodus, an unexpected turn of events is taking place. The Left underestimated
the impact of the pre-pandemic outmigration. It was never good for the fiscal
and cultural health of the state that so many, after weighing the pros and
cons, voted with their feet. One can be forgiven, however, for thinking that
the Left was not all that shaken up by 650,000 middle-class people per year
realizing that, in Texas or Arizona, they could buy more house for less money, with
a smaller tax burden and greater job prospects for their kids. The “don’t let
the door hit you on the way out” mentality of so many lawmakers was hardly
disguised, especially while another social-media company was making an IPO or a
new venture-capital fund was ringing the cash register.
But the newest development in the Left’s fatal designs
for this state is a game-changer. It is no longer just a family of four making
$90,000 per year packing up the U-Haul and headed to Utah for a better life.
The leftists themselves have had enough. The tech wizards of Palo Alto realize
they have artisanal coffee shops in Denver, too. The cultural appeal of
California has spread outside its own borders. Middle-class traditional
families had already made the cost–benefit analysis of leaving the state, but
now the gravy train has caught on as well. The Hewlett-Packards and the Teslas
and select Silicon Valley gurus capture headlines now as they pack their own
version of a U-Haul. What lies ahead for the state is ten years of a slow build
of this same dynamic — even the cool kids are getting out of Dodge.
Legislators make conscious decisions sometimes. So do
middle-class families. And guess what? So do hip, tech-savvy Millennials.
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