Some define “insanity” as repeating errant behavior again and again, irrationally anticipating a different outcome.
By this definition, California’s Democratic lawmakers, now unloosed in state budget negotiations, are behaving insanely. It has been demonstrated time and again that budget policies that “soak the rich” only dry up investment, hobble the economy, wipe out jobs and reduce tax revenues. Yet state Democrats are once again trying to “soak the rich.” And they expect a different result this time?

They have proposed billions of dollars in new taxes on corporations and “the wealthy” to shore up California’s $17.2 billion budget deficit. They aim to generate $10 billion in new revenue by raising the state income tax rate on joint filers whose taxable income exceeds $321,000 and on those who make $642,000 or more and by closing tax “loopholes” for higher-bracket corporate and individual taxpayers. And they want to reduce the dependent credit for taxpayers whose adjusted gross income exceeds $150,000 from $294 per child to $94 per child. They also seek to repeal indexing for inflation, which will cram middle-income taxpayers into higher tax brackets year after year.

To Assembly Speaker Karen Bass, D-Baldwin Vista, the only way to stanch the state’s burgeoning deficit is “by closing tax loopholes and rolling back overly generous tax breaks that we are giving to big corporations and the wealthiest Californians.”

She and her colleagues have apparently never heard of budget reductions.

Raising the top marginal tax rates is a prescription for still higher deficits and a sicker economy. With California jobless claims surging, a recession in full bloom and the real estate market in historic distress, these new taxes would come at the worst possible time.

California is running out of rich people to “soak.” Californians with incomes above $100,000 already pay 83 percent of the state’s income taxes. Does this sound like they are not paying their fair share?

And they are departing the state in droves. None of these tax refugees feel that they have been given “overly generous tax breaks.”

The Legislature’s liberals need to enroll in Economics 101. They still have not learned that “soaking the rich” has always caused the well-heeled to relocate to milder tax climes. And when the wealthy flee, they take with them investment dollars and jobs that government can never replace.

Doubt the cause and effect? Look around. “The rich” are already fleeing California’s high-tax, high-regulation environment. The AT&T call center is leaving Sacramento and taking 187 jobs with them to Texas. The AAA auto club just announced that it will take 900 call center jobs out of state because, according to its press release, “…it costs more to do business in California.”

Two weeks ago, Toyota declared that it was forsaking California for Mississippi to build its new hybrid Prius. That will cost another 1,000 jobs. Fluor, Nissan, CSC, Berry Petroleum and Venoco, among others, have also escaped to other states. Unemployment in California is higher than at any time in the last ten years. 

The Wall Street Journal reported last week that politicians in Arizona and Nevada, both hard hit by the real estate collapse, are hoping that Democrats raise taxes here, so that more high-income California expatriates pour into their states.

Engendering class envy is a favorite election tool of liberals, who unwittingly preach a form of Minor League Marxism. In California, this kind of politicking seems to work. But voters need to come to their senses before California’s economic woes become irremediable. Raising marginal tax rates on higher-income Californians is counter-productive. People are not poor because someone else is rich. They become poor because they lack the jobs that only “rich” investors, not government, can create.