Atlas Shrugs off California

In the Ayn Rand novel, Atlas Shrugged, the productive members of the nation cease producing and go into hiding in response to an intrusive government that has been regulating and taxing them out of business (in the interests of those more needy).

Fast forward fifty two years to California. California’s top income tax rate is 9.3%. But there’s more; you hit the top rate at just $47,056 a year. But there’s more, there is also a 1% surcharge if you make over a million dollars a year. That makes California the state with the highest income tax rate. But there’s more; California has a 7.25% sales tax.

The productive residents of California have taken note of the burden of regulations and taxes and, in true Atlas Shrugged fashion have voted – with their feet. California now leads the nation in population exodus. But there’s more; since 2004 California has lost about 1.5 million taxpaying households to more economically congenial states. But there’s more; during the same period California gained 2.4 million people, mostly immigrants (both legal and illegal) who pay little or no taxes and use taxpayer funded services.

The consequence of excessive regulation and wealth redistribution programs is that California is on the verge of bankruptcy. It has an unemployment rate of 11.6%, an unemployment trust fund balance of $113,874,373 and there’s more, it has borrowed $3,402,186,239.30 from the U.S. Government to keep the program afloat.

But there’s more; as the legitimate economy deteriorates, the "cash economy" grows. Employment opportunities here are increasing. There are always positions available as drug dealers, gang extortionists, auto thieves, arsonists, prostitutes, loan sharks, etc. But there’s more; these positions pay no taxes, in fact they are revenue negative: they cost California billions of dollars to fight.

There are limits to what a (any) government can spend. There are also limits to how heavily a (any) government can regulate and tax its productive members. If these basic underlying economic issues are not addressed, over time California will degenerate into regional gangland narco states with a titular government in Sacramento.