California is a great place to live. The climate in Orange County is wonderful. I like the people. But the taxes are high.
I’m in Connecticut for the rest of the week (there won’t be many posts this week because of that), and when I tell people that California’s maximum tax rate is 9.3% (it actually is 10.3% for millionaires), they look at me like I’m crazy.
I’m not. Yet our state has a structural budget deficit, conservatively estimated for next year at $6 billion.
There are only two ways to fix a budget deficit: increase revenues or decrease spending (or some combination of both). So what is our Governator proposing? A mandatory health care insurance program (government run, so that’s an increase in spending), with it thrust on the back of businesses (who will pay more in taxes–but that will be passed on to customers, or the businesses will be much less likely to expand in California; all of these will lead to decreased revenues).
When I got my MBA, one of my instructors was Arthur Laffer, inventor of the Laffer Curve. Generally, the Laffer Curve holds that a decrease in tax rates can lead to an increase in tax revenues—there’s a sweet spot for taxes (as far as tax rates). By whatever measure you use, California has exceeded that.
Do I expect our Legislature to look at cutting programs? Well, Stanford did beat USC last Saturday, so anything is possible…but I think this would be the equivalent of Youngstown State beating USC.