NCPA - National Center for Policy Analysis

California Dreaming: Missing America's Wake-Up Call

November 12, 2010

At a time when the national appetite for cap-and-tax legislation gas gone gastric, Proposition 23, offering an antidote to the previously enacted economic poison pill called AB 32, was rejected by 62 percent of California voters, says Larry Bell, a professor at the University of Houston.

  • As it now stands, AB 32, California's climate change law, mandates a 30 percent cut in carbon emissions from cars, trucks, utilities and other businesses by 2020.
  • It is to be accomplished with a web of new taxes and regulations scheduled to take effect in 2012.
  • Proposition 23 would have suspended AB 32 until such time that the state unemployment rate declined to 5.5 percent or less for four consecutive quarters.

A 2009 study estimated that implementation costs of AB 32 "could easily exceed $100 billion" and that the program would raise the cost of living by $7,857 per household annually by 2020.

The regulatory environment has turned dreams of good lives into nightmares for many who are leaving in hordes, taking much of the state's tax base with them, says Bell.

  • About 2.14 million people fled to other states between 2005 and 2007, while only 1.44 million moved in.
  • Meanwhile, the state's debt rises at a rate of about $25 million per day.
  • Some 2.3 million Californians (12.5 percent) are without employment, and factory jobs plummeted from 1.87 million to 1.23 million (34 percent of the industrial base) since 2001.
  • California, with 12 percent of the U.S. population, has nearly one-third of the nation's welfare recipients and 15.3 percent of all Californians live in poverty.
  • Its budget gap for 2009 to 2010 ($45 billion) equaled 53 percent of total state spending, despite having the nation's highest state sales tax and third-highest income tax.

Source: Larry Bell, "California Dreaming: Missing America's Wake-Up Call," Forbes, November 10, 2010.

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