Professor Bainbridge...on law, politics, religion, culture & food

California’s Self-Inflicted Wounds

California is likely to seek an emergency federal loan of up to $7 billion due to revenue shortfalls. Tax receipts in September 2008 were more than $800 million below state projections, leaving a potential for a multi-billion dollar budget shortfall. The reason is pretty obvious. According to the Tax Foundation, California already ranks 48th in state business tax climates. Yet, in the last budget cycle, the Democrats in Sacramento wanted to increase taxes even higher than they already are

People respond to incentives. If businesses face a lousy tax climate year after year, eventually they decide to expand elsewhere or even to relocate. Sacramento needs to figure that out.