Final Score: Dwight Howard 8,000,000 – Jerry Brown 0

July 7, 2013 by Dan Mitchell

I feel sorry for the people of California.  They’re in a state that faces a very bleak future.

And why does the Golden State have a not-so-golden outlook?

Because interest groups have effective control of state and local political systems and they use their power to engage in massive rip-offs of taxpayers. One of the main problems is that there’s a bloated government workforce that gets wildly overcompensated. Here are some staggering examples.

A state nurse getting $331,000 of annual compensation.

A county administrator getting $423,000 pensions.

A state psychiatrist getting $822,000 of annual compensation.

Cops that get $188,000 of annual compensation.

A city manager getting $800,000 of annual compensation.

But overpaid bureaucrats are not the only problem. California politicians are experts at wasting money in other ways, such as the supposedly high-speed rail boondoggle that was supposed to cost $33 billion and now has a price tag of $100 billion.

You may be thinking that I’ve merely provided a handful of anecdotes, so let’s recycle some numbers that I first shared back in 2010.

California state spending has outgrown the state’s tax base by 1.3 percentage points annually for 25 years. Simple arithmetic dictates that in lieu of constant tax increases, this perpetuates a deficit. From 1985 to 2009 state GDP in California grew by 5.5 percent per year, on average (not adjusted for inflation). Annual growth in state spending was 6.8 percent, on average.

In other words, California politicians have routinely violated my Golden Rule for good fiscal policy. And when government grows faster than the productive sector of the economy for an extended period of time, bad things are going to happen.

And those bad things can happen even faster when upper-income taxpayers can leave the state.

Walter Williams sarcastically suggested last year that California barricade the state to prevent emigration, reminiscent of the actions of totalitarian regimes such as East Germany.

But since state politicians fortunately don’t have that power, successful taxpayers can escape, and hundred of thousands of them have “voted with their feet” to flee to states such as Texas.

One recent example is NBA superstar, Dwight Howard, who left the Los Angeles Lakers for the Houston Rockets. There are probably several reasons that he decided to make the switch, but the Wall Street Journal opines on a very big reason why he’ll be happier in Texas. The WSJ starts by looking at Mr. Howard’s two options.

NBA labor agreement…allows the Lakers to offer Mr. Howard $117 million over five years, compared to a maximum of $88 million over four years in Houston.

That looks about even when you look at annual pay, with the Lakers offering $23.4 million per year and the Rockets offering $22 million per year, but there’s another very important factor.

…this picture looks a lot different once the tax man cometh: “Howard would pay nearly $12 million in California tax over the four years if he signs with the Lakers, but only $600,000 in state tax should he sign with Houston. This means that a four-year deal with Houston would actually yield an additional $8 million in after-tax income.” California has the highest top rate for personal income in the nation, while Texas has no state income tax.

Some of you may be thinking this is no big deal. After all, the Lakers will sign somebody to take Dwight Howard’s place and that person will also get a huge salary.

That’s true, though Lakers fans probably aren’t happy that they’re destined to be a middle-of-the-pack team. The bigger point, though, is that there are tens of thousands of other high-paid people who can leave the state and there’s no automatic replacement. And many of them already have escaped.

Including very well-paid Chevron workers.

Now that California’s moochers and looters have imposed an even higher top tax rate of 13.3 percent, expect that exodus to continue. Other pro athletes are looking to escape, andeven famous leftists are thinking about fleeing.

In other words, Governor Jerry Brown can impose high tax rates, but he can’t force people to earn income in California. I don’t know whether to call this “the revenge of the Laffer Curve” or “a real life example of Atlas Shrugs,” but I know that California will be a very bleak place in 20 years.

P.S. Here’s the famous joke about California, Texas, and a coyote. And here’s an amusing picture of the California bureaucracy in (in)action.

_____________

Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com

Dan Mitchell on Texas v. California (includes editorial cartoon)

Editorial cartoon from Dan Mitchell’s blog on California’s sorry state of affairs

Cartoons from Dan Mitchell’s blog that demonstrate what Obama is doing to our economy (Teacher unions not good for the kids)

Cartoons from Dan Mitchell’s blog that demonstrate what Obama is doing to our economy (Obama’s out of control spending not helped by raising taxes on rich)

IRS cartoons from Dan Mitchell’s blog

Dan Mitchell explains what happened in Cyprus

Dan Mitchell, Ron Paul, and Milton Friedman on Immigration Debate (includes editorial cartoon)

Dan Mitchell: Cartoonists React to the Senate Democratic Budget

Cartoons from Dan Mitchell’s blog that demonstrate what Obama is doing to our economy Part 6

Dan Mitchell on the minimum wage law (includes two editorial cartoons)