Like the harried traveler who made famous the expression, “Don’t touch my junk”, I have elected my own personal protest, California style. I have decided to OPT-OUT of California to protest my overgrown state government. I am tired of California legislators sticking their hands in my pants to pay for the European style social welfare state they have created. My work, my earnings and my taxes will go elsewhere.
I am one of those evil “high-earners” in California with income over $200,000 per year. It is unimportant to state legislators that we high-earners pay most of California’s taxes. According to the Franchise Tax Board, in 2007 more than 87 percent of California capital gains taxes came from taxpayers with adjusted incomes of more than $200,000. Residents with incomes over $200,000 pay 66 percent of its income taxes even though earn just 39 percent of the state's income. More important to California’s future, most of us are small businesses, which account for 65 percent of new job growth in the state.
When I moved to California in 1981, California was truly the Golden State. Its budget revenues of $22.1 billion levied just $920 per person from its population of 24 million. It had great freeways, great schools and its inexpensive college/university system was the envy of the planet. By 2009, the budget revenues had grown to $86 billion, or $2,324 per person from each of its 37 million residents. But California has a $25.4 billion deficit, which means the aging “movement” activists who govern this state are spending $114 billion or $3,081 per resident. Spending is up 520% from 1981.
The $86 billion in revenues California collected from capital gains and income taxes is not the only tax that has increased. Despite Prop 13 that capped property taxes at 1%, property taxes expanded from $6.36 billion from 1980-1981 to $43.16 billion in 2006-2007, an increase of 579%. For point of reference the CPI index increased just 133%, from 88 in 1980-1981 to 202.4 in 2006-2007.
The Legislative Analyst's Office says California will have an additional $6.1 billion shortfall in the current fiscal year reaching $25.4 billion next year. Legislative Analyst Mac Taylor says the state faces deficits of $20 billion each year through 2015.
"Unless plans are put in place to begin tackling the ongoing budget problem, it will continue to be difficult for the state to address fundamental public-sector goals -- such as rebuilding aging infrastructure, addressing massive retirement liabilities, maintaining service levels of high-priority government programs and improving the state's tax system," the report said.
How did California voters respond to this fiscal irresponsibility in November? They rewarded the Democratic Party with every elected office from Governor to Insurance Commissioner, and returned Barbara Boxer to the US Senate. I guess California voters did not get the Tea Party memo that resulted in a “shellacking” of 64 Democrat Congressional seats in the rest of the nation. The political tsunami that hit even parts of the Eastern seaboard in 2010 totally missed California. Perhaps it ended somewhere in Nevada with the re-election of Harry Reid.
So, in protest to the insensitive indulgent big-spenders that run Sacramento, I say, “Don’t touch my junk!!!” My beautiful California home is now on the market for $2,000,000. My next home will be in a no state income tax state like Texas or Nevada. I will not buy that new Jaguar that I was planning to purchase for $75,000. I will keep my old Cadillac and deprive Sacramento of $6,562 from its 8.75% sales tax. My next purchase for my real estate business will be an office building in Prague in the Czech Republic, a democracy that has lower taxes and fewer regulations. My income will remain either offshore or in a state that does not confiscate like the money grubbers in Sacramento. And, I will not be investing my capital to create any new jobs in California. In the digital age, my staff will be located in states that are a little more business friendly.
Apparently, I am not alone. Migration out of California exceeds the rate of almost every other state. Why are my fellow “high-earners” leaving the Golden State? Maybe it is because California ranks nationally in the bottom two for business friendliness while placing third in state income taxes.
We have Jerry Brown as our Governor again, meaning that he will live his entire life without a real job. The Central Valley, once agricultural wonderland of America, has Depression era unemployment, this as a result of a green-inspired court water shut-off designed to protect an Anchovy sized piece of bait called the Delta Smelt. And, our brilliant voters – including those working class voters most impacted – rejected Prop 23. That means that on January 1, 2011, California must begin to reduce our greenhouse gases by 40%. To achieve this noble goal, we seem certain to make ourselves even more uncompetitive with other countries and other states.
If that was not enough, voters also approved Prop 25 which allows the public union dominated Democrats to pass its budget with a simple majority. They did such a good job ($20 billion shortfalls) when they were forced to obtain a 2/3rds vote for approval. They no longer will need a single Republican vote to pass their budgets.
Margaret Thatcher remarked to Parliament on February 22, 1990, “The trouble with socialism is that you eventually run out of other people’s money.” Such will be the fate of the failed state of California and its free spending legislators, when high-earners like myself vote with their feet, and their wallets, and take their earnings elsewhere.
Robert J Cristiano PhD is the Real Estate Professional in Residence at Chapman University in Orange, CA and Head of Real Estate for the international investment firm, L88 Investments LLC. He has been a successful real estate developer in Newport Beach California for twenty-nine years.
Photo by ASurroca