Recently at Reason.tv: More Taxes or More Jobs—California Shows You Can't Have Both

It's hard to find a politician who isn't eager to "do something" about high unemployment. Turns out California has found one way to save and create certain kinds of jobs—spend like mad and raise taxes.

That job-creation strategy has worked quite well for government-sector workers. Problem is the statewide unemployment rate is still among the highest in the nation, and many private-sector employers are heading to states like Texas, where taxes are lower and regulations are lighter.

"I would love to have companies calling me saying, 'We'd like to move to California, can you help us with that relocation?' I get none of those calls," says business relocation coach Joe Vranich. "The calls I do get are, 'Hello, we want to move out of California, can you help us do that?'"

Vranich says there's no one reason why businesses leave. He calls it "death by a thousand cuts," where job creators get fed up with everything from high taxes to traffic gridlock and legal hassles.

Take Rick and Jack Newcombe, the father-son team that runs Creators Syndicate. A long legal battle with the city of Los Angles might end up being their company's final cut. The Newcombes say the city arbitrarily stuck the company into a higher tax category and officials are applying the hike retroactively. City officials are demanding $400,000 in back taxes, but Rick Newcombe calls the whole episode "legalized theft," adding that a tax penalty of that size would force the company to lay off 10 employees.

It's ironic that such drama unfolds in a city where Mayor Antonio Villaraigosa is always doing something—transit projects! green jobs!— he hopes will stimulate the economy. And steep statewide unemployment persists long after Gov. Arnold Schwarzenegger eagerly accepted billions in federal stimulus funds. In fact, the Bush-Obama scatter shot of bailouts, stimuli, and rescue plans has fallen well short of proponents' promises.

Want to create and save jobs? Maybe it's time for politicians to stop doing so much and start undoing some of their worst blunders.

"More Taxes or More Jobs?" is written and produced by Ted Balaker, who also hosts. Camera-Animation: Hawk Jensen; Associate Producer: Paul Detrick; Additional Photography: Alex Manning.

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  • ||

    California... a state that has figured out "too big to fail" applies to them.

  • Ah-nuld||

    So vaht are you vaiting fohr?

  • ||

    Get in deh choppeh!

  • ||

    California: Just like Greece but without the history.

  • Hockey Guy||

    Helluva price to pay for the weather.

  • Michael Ejercito||

    We need to cut taxes and spending now!

    Screw those public employee unions!

  • ||

    We need to cut taxes and spending now!

    But don't you believe in ROADS?

  • Jeffersonian||

    Do you know what it's like to fall in the mud and get kicked... in the head... with an iron boot? Of course you don't, no one does. It never happens. Sorry, Ted, that's a dumb question... skip that.

  • ||

    Where we're going we don't need... roads.

  • ||

    Yeah, because cutting taxes always means no roads and no government, i.e. reductio ad absurdum (Bing it).

  • Teacher's Pet||

    Dysfunctional
    Teachers are outnumbered . . . in their own union.

    It’s one thing for unions to be dominated by veteran teachers skeptical of change; it’s a problem of a whole different kind when they’re dominated by non-teachers and retirees. Yet, in New York City’s United Federation of Teachers (UFT) elections last week, just 40 percent of votes were cast by active classroom teachers.

    In last week’s UFT election (full data here), a total of 18,713 ballots were cast by active elementary-, middle-, and high-school teachers, who voted at rates of 28 percent, 20 percent, and 30 percent respectively. “Functional teachers” — a term the UFT New Teacher Handbook defines to include “attendance teachers; guidance counselors; hearing educational services; laboratory specialists and technicians; nurses and therapists; paraprofessionals; school secretaries; social workers and psychologists; [and] speech teachers” — voted at a rate of 20 percent, casting 10,629 votes. Altogether, as Anna Phillips at GothamSchools reports, active union members voted at about a 24 percent rate.

    The union’s retirees, meanwhile, voted at a 50 percent rate, yielding 24,978 ballots. A recent rule change diluted the impact of retiree votes so that each counts for about seven-tenths of a regular vote. This adjustment meant that the retirees cast the equivalent of about 18,000 votes — as if they voted at a rate of 35 percent.

    So, do the math. Even adjusting for vote dilution, active classroom teachers cast only 40 percent of the votes, and retirees cast the same amount. That doesn’t make it easy for reformers focused on improving work conditions and pay for today or tomorrow’s teachers to marshal the votes for change.

    As one teacher, Martin Haber, commented at GothamSchools.org, “What is the reason that retirees are allowed to vote anyway? I am just a few years away from retiring myself, but would not expect to play an active role in the education scene once I am not an active teacher — even if I will continue to pay dues, fees, etc.” Mr. Haber’s question is a terrific one.

    As one wag notes, “We would never consider giving former New York State residents the right to vote for governor. . . . Why would we give retired teachers the right to have such a strong influence on key educational policies that will never impact them? The fact that retired teachers may have some interest in a pension program is almost incidental.”

    http://article.nationalreview......ick-m-hess

  • ||

    The Truth about Arnold:

    http://www.collegehumor.com/video:1827919

  • Gene Berkman||

    The arrogance of government in California is astounding.
    "...the city arbitrarily stuck the company into a higher tax category and officials are applying the hike retroactively. City officials are demanding $400,000 in back taxes..."

    In private business, you cannot raise the price after you finish the job or make the sale, and then demand a retroactive payment at the new price.

    If you run a business, and your sales tax payement arrives one day late, you get a 10% late fee - equivalent to annual interest of 3,650%. But politicians will denounce a private firm charging 12% annual interest as "scamming the consumer."

  • Chad||

    Sorry, guys, but the DATA doesn't match your theory...at all. Indeed, states with higher net tax burdens have HIGHER gdp's! Yes, HIGHER. Let that sink into your thick skulls for a while. When you recover from the stun and realize that your entire ideology is critically wounded, please take a look at the data. Plot it, and note the POSITIVE slope of gdp vs tax burden.

    http://www.taxfoundation.org/files/sr163.pdf

    Now, I am not asserting any causation at all. I am merely pointing out that YOUR belief that the causation must run in a certain direction is belied by the data.

    Have a nice day, my poor little friends.

  • ||

    Oh Chad, so sure that you are correct, yet so wrong.

    I made this just for you:

    http://i1042.photobucket.com/a.....axrate.png

    There is no linear correlation between these data.

  • Chad||

    Wow! A libertarian who can plot a graph. You can even fit it second-order (or third, or tenth).

    Again, note that your idea of "high taxes kill economic growth" is nowhere to be seen. The outliers on the low-tax side can mostly be explained: they are either low-population states with large natural resources, and are using the royalties to offset taxes, or are some of the most popular tourist spots in the country, and are milking people from out of state instead of their own citizens.

    Any way you cut it, the data does not support your beliefs one whit.

  • ||

    Now we're getting somewhere, Chad. (it's second order by the way)

    Doesn't that depend on what "high taxes" and "kill economic growth" mean? I mean, the lowest tax rate is less than 5% lower than the highest, so I wouldn't expect to see a noticeable difference in economic growth (which gsp is NOT a measure of, by the way), especially considering the myriad of other factors that go into a states economy. The states don't have equal imports, exports, and other economic factors, so saying the highest tax rates should have the lowest gsp is pretty simplistic isn't it. The fact is that this "correlation" won't tell us diddly squat about what the economic effect would be if we lowered or raised taxes in the states.

  • ||

    Also, my point is proven by your little explain-away: if economic resources can inflate the gsp of lower tax states, why wouldn't the same thing be true for states on the other side of the spectrum? New York, for example, has the financial capital of the world.

  • cynical||

    I wonder what would happen if you normalized per-capita GDP to average cost of living and then plotted it.

  • ||

    I'd be interested to see a total figure and an area by area breakdown of what unemployment rates are across the nation when government employees are completely eliminated from the equation. Just curious, since the arguement could be made that they are simply a drain on the economy and do not generate a value increase in the production chain.

  • ||

    I live in Idaho. I provide Emergency Road Service dispatch for CALIFORNIA! Every time the legislature thought they could dictate wages or benefits, the jobs moved away. I live in Idaho, doing a job that used to be done by California employees.

  • Geotpf||

    So the government of the city of Los Angles is being obtuse? Is this type of retroactive taxation acute in the city of Los Angles?

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