NCPA - National Center for Policy Analysis

WHERE WILL THE NEW JOBS GO?

October 12, 2006

California's government seems to be trying hard to reduce economic growth.  With gasoline and electricity prices already well above those in neighboring states, and the new regulations on carbon dioxide emissions, which no neighboring states have, California appears headed for an economic decline, says Joe Cobb, a senior fellow with the Heritage Foundation.

Meanwhile, neighboring states are doing plenty to take jobs and economic growth from the Golden State:

  • New Mexico has reduced income tax rates by 35 percent.
  • Arizona has just cut its income tax rates 10 percent across the board.
  • Utah also cut income tax rates and became the first state in the country to offer taxpayers the choice between filing taxes under a new flat tax or remaining in the current graduated system.
  • Nevada has no income taxes.

Compare California's prospects with the rapid economic growth in Nevada, Arizona, Utah and New Mexico -- all of which have government budgets in surplus:

  • California's 10.3 percent top income tax rate would have been pushed even higher, to 12 percent, if a proposition had passed in June.
  • Arizona's top income tax rate is 4.8 percent -- next year, 4.3 percent.
  • New Mexico and Utah's top rates are each 5.3 percent.

In addition, California has the highest workers' compensation costs and the highest health care premiums of any of the western states.  An employer with such nearby options to expand in lower-tax, lower-cost states would be foolish to expand in California.  But without a lot more jobs in the future, tax revenue won't grow.  And with all the promised government spending, if California doesn't turn its economy into one of the strongest growth sectors in the country, it is doomed.

Source: Joe Cobb, "Where Will The New Jobs Go?," Santa Clarita Valley Signal, October 10, 2006.

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