There’s still no budget in California. However, the Los Angeles Times reported that Senate President Don Perata (D-Oakland) sent an email to fellow Democratic Senators that he would attempt to work with Republicans to write a new budget that has no new taxes and no borrowing. We shall see if there’s a real budget or one full of gimmicks and if it actually passes this week.
Meanwhile, the Wall Street Journal noted in an editorial that California and New York, the states with the highest tax rates, are losing taxpayers. The Journal speculates that individuals who pay a lot of tax and can move do so. I don’t have to speculate about that—I know the Journal is correct. I’ve had corporate clients relocate from Southern California to low-tax states and their businesses suddenly became profitable.
The Laffer Curve dictates that decreasing tax rates can lead to increased tax collections. It also leads to businesses making more money which can lead to increased employment and a better economy. Do you think the politicians in Sacramento will realize this? I doubt it….