California’s High-Tax, Big-Government Comedown

Anyone who has ever watched Animal Planet should be familiar with migrations. Geese do it, wildebeests and whales do it, turtles do it and, yes, people do it too. To migrate is a natural phenomenon.

What’s interesting about most migrations is their purposes are generally positive: sex, food, sun and other such motivations. “The grass is always greener” is what they say.

For humans and, to a lesser extent, animals, a number of migrations also occur for negative reasons: famine, war, pestilence and, yes, taxes without corresponding benefits.

Population outmigration can be a key marker for a disturbed society with deeply rooted policy flaws. It’s a far better sign of a state’s health to have people lined up on its borders trying to get in than it is to have people lined up on its borders trying to get out.

Over the past 165 years, California has grown at an average annual compound rate of 3.8%. But in recent times it has morphed from being America’s (if not the world’s) greatest people attractor to being a massive population and jobs repellent (see actual population in blue on the chart above).

And there really is no end or solution in sight. If it weren’t for net immigration (people who move from another country to California), California would be a mere shadow of its present size (the population from 1960 on without net immigration is shown in red).

Post-War Boom

To set the stage for the story of today’s California, you should be aware that after World War II, Gov. Earl Warren cut California’s highest marginal income tax rate from an astronomical 15% to 6%, where it remained for well over a decade. He also cut the state’s sales tax rate.

In the chart on Page A15, I have plotted California’s population growth relative to the U.S. from 1959 to the present. I have also plotted California’s net domestic in-migration (people who move from state to state) as well.

My choice of 1959 is far from arbitrary. That was the year when Edmund G. (Pat) Brown became governor of California. It was also a year of enormous tax increases in California — no mere coincidence.

As governor in 1965, Brown even proposed raising California’s highest personal income tax rate back up to 15%. But he withdrew that proposal when tax revenues exceeded projections.

After eight years of calamitous government, Ronald Reagan took the helm in 1967 and showed that he too could raise taxes with the best of them, culminating in his 1972 increases on corporate income and sales .

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