It’s hard to have sympathy for people who choose to live in California.
It’s their business, after all, if they want to be domiciled in a state where the taxes are crushing, the price of gasoline is out of sight, and the state government is teetering on the edge of collapse under the weight of presidential wannabe Gov. Gavin Newsom’s policies.
The people who’ve been leaving are smart. It’s not just millionaires and billionaires who’ve fled or are planning to flee, because the state legislature is preparing to adopt some version of Newsom’s annual tax on total wealth. That would be an atrocity in and of itself and is, parenthetically, an egregious trespass on the right to privacy. Democrats like Newsom are apparently only interested in keeping government out of our bedrooms. They welcome its intrusion into our bank accounts, investments, and estate plans.
Based on what we know, the outmigration has taken jobs with it. It’s produced revenue losses where estimates projected gains. California is “golden” no more. Those of you of a literary mind should note that over the past few years, more people have moved from California to Oklahoma than have gone in the other direction. Tom Joad, it seems, has decided to return home.
For ordinary folks forced to remain because they lack the resources to relocate, even as the jobs they have evaporate before their eyes, the situation is increasingly dire. There aren’t nearly enough new jobs being created to replace what’s been lost. Higher taxes on job creators will widen the gap as the politicians in Sacramento make as big a mess as the voters will tolerate.
When its internal economic madness spills out across its borders, however, it becomes everyone’s problem. Action must be taken. And that’s where we are now. The United States Supreme Court will soon decide whether to hear Florida v. California, a challenge to the latter’s unconstitutional business income apportionment regulation.
The court should take the case. It’s important to place limits on how a single state can tax residents and businesses that operate in another state. The arm of the tax collector needs to be cut off at the border. California has been especially aggressive in going after tax dollars it says are owed by people living and businesses operating elsewhere, providing the best, but by no means only, example of how big-spending politicians are trying to tax income earned outside their taxing jurisdiction.
Florida GOP Gov. Ron DeSantis contends California’s “Special Rule” unconstitutionally distorts the apportionment of business income. This results in the over-taxation of out-of-state businesses and investors, including small businesses and investment management firms. DeSantis wants the high court to enjoin Newsom and his successors from any further enforcement of the rule, arguing that it violates the Commerce, Import-Export, and Due Process Clauses of the U.S. Constitution.
Florida also argues, correctly, that what California does undermines other states’ ability to set their own tax policies and attract business and job creators, thereby upsetting the balance of competitive federalism.
If the court allows California to continue its current practices unchecked, it will set the precedent necessary for other cash-strapped states suffering net outmigration to do the same. New York, Illinois, Massachusetts, and other places where industry once hummed, and tax dollars floated down from the sky like rainwater, can no longer afford the welfare state they’ve created on their own, and by a lot. They’re looking beyond their borders for opportunities to export their tax burden. They have no problem with sponging off the hardworking men and women living in states like Texas, Utah, and, yes, Florida, where sensible, pro-growth, job-creating policies are the norm, to buy votes with social spending.
California politicians like Jerry and Willie Brown, Gray Davis, and Newsom created the mess the state is in. They’ll deny that, just like they’ll deny the finances are shaky. Their actions say otherwise. Unless the high court takes up the case and finds in favor of Florida, the bolder the big, broke, blue state leaders will be as they try to balance their budgets on the backs of everyone else, from coast to coast. The Special Rule is then just the beginning.
Peter Roff is former U.S. News and World Report contributing editor and UPI senior political writer now affiliated with several DC-based public policy organizations. You can reach him at RoffColumns@gmail.com and follow him on Twitter @TheRoffDraft.