Friday, July 10, 2009

The Death of the Golden State

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Those who've read this blog for awhile know that I was a Californian for a decade. I lived in the most beautiful city in America--San Diego--and would not hesitate to return if I could. I love the state, it's people and the ability to do everything from ski to hike in the desert to swim in the Pacific Ocean all in one day.

That said, my former home state is dying a slow but predictable death.

Onerous government regulation has driven even the most loyal businesses out of state in a migration that has nearby states like Arizona, Oregon and Nevada reaping the benefits. Mexico has also seen a nice influx of exasperated business owners taking their wares to less oppressive climes.

From strict environmental regulation to insane tax laws, the reasons are myriad. Businesses want to stay and have developed deep roots in the state but in this economy are making the decision to pick up and go. We may be seeing another example soon:

Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city's decision to ignore its 1994 ruling.

Their official position is that the city is not bound by past rulings -- only taxpayers are. This is why we have been forced to file a lawsuit. We will let the courts decide whether it is legal for adverse rulings to apply only to taxpayers and not to the city.

We work with hundreds of outside agents, consultants, independent contractors and support services -- many of whom pay taxes to the city of Los Angeles. This spurs a job-creating ripple effect on the city's economy. Yet I suspect many companies like ours already have quietly left town in the face of the city's taxes and regulations. This would help explain the erosion of jobs.

Regardless of the outcome of our case, the arbitrary and capricious behavior of some bureaucrats is creating a lose-lose situation for everyone involved. If we win in court, the taxpayers of Los Angeles will have lost because all those tax dollars will have been wasted on needless litigation.

If we lose in court, the remaining taxpayers in Los Angeles will have lost because their burden will continue to swell as yet another business moves its jobs -- and taxpayers -- to another city.
The Governator has mired the state in the worst recession seen in decades by his own policies. Instead of being pro-business or at least semi pro-business, he's taken the liberal Republican route and increased environmental regulation. He's done nothing to tackle the immigration problem and has instituted a tax policy that is so regressive as to make it socialistic.

Californians have watched home prices decline to one-half the level they once were and taxes have increased on even the smallest products. From San Francisco down to San Ysidro, inane regulations coupled with massive job losses have placed a burden on the state that will take years to get out from under.

Were a smarter approach of massive tax cuts in concert with healthy government layoffs implemented, the state would be in a much better financial situation and would still be the economic engine that drives the country. Instead it's now a third-rate state with a horrible credit rating and a really nice environmental record.


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