A dog-and-pony show

To hear our local state legislators tell it, California’s current high unemployment rate—11.2 percent—isn’t due to the national recession, the popping of the housing bubble and the meltdown on Wall Street. No, it’s because California business owners are fleeing the state and its onerous regulations and high taxes.

Last Friday (April 24), Assemblyman Dan Logue (R-Linda) and state Sen. Sam Aanestad (R-Grass Valley) were in Reno, holding hearings on why business owners have moved or are planning to move out of California to states like Nevada. More than a half-million manufacturing jobs have left California in less than a decade, and the state has shed nearly 600,000 private-sector jobs in the past eight years, the lawmakers maintain, echoing what has become a latter-day mantra for the Legislature’s Republican caucus.

“Considering California’s high taxes and heavy regulations, it’s no wonder that Nevada—a state without many of our cumbersome issues—is benefiting,” Aanestad states in a press release.

But is that true? According to a recent study by the Public Policy Institute of California using current data, the reality is that more business—including employees working for companies based elsewhere—is coming into the state than is leaving. (For more details, see the News story by Dennis Myers, of our sister paper the Reno News & Review). The institute’s report called the effect of business relocations on California “trivial.”

In fact, in the past year, according to the Sacramento Bee, California has lost a smaller percentage of its jobs than Oregon, which has no sales tax, and Nevada, which has no income tax.

Indeed, Nevada is experiencing many of the same problems California is having. Unemployment is nearly as high, thanks to the real estate and construction downturn. And, according to Palo Alto economist Stephen Levy, the state’s job-loss rate, at 5.2 percent, is third worst in the nation, while California is ranked No. 10, at 4 percent.

It’s true that California businesses are strongly regulated. In most cases the regulations serve good purposes. All would agree that, where they don’t make sense, they should be changed or eliminated. And the state’s tax system has long needed, since the passage of Proposition 13 in 1978, an overhaul to make it more predictable. It’s not that we’re taxed too severely, it’s that tax revenues are volatile and the system is riddled with loopholes.

Logue and Aanestad are Republican ideologues who are opposed to regulation and taxation under almost any circumstance. They went to Reno not so much in search of answers, but rather to put on a dog-and-pony show designed to buttress their preconceived ideas. They would have served the people of California better by staying home and working seriously to improve the state’s regulatory framework and reform its tax structure.