Gov. Newsom is trotting around the country for the stated purpose of shoring up support for beleaguered President Joe Biden. But let’s acknowledge what is really going on here. Whether as Biden’s successor, should the president withdraw (or be withdrawn kicking and screaming), Newsom clearly has his eyes on 1600 Pennsylvania Avenue.
Newsom touts what a great job he has done in California – just listen to his state-of-the-state address as an example – but even if citizens of other states might be receptive to his oration and style, he better hope they don’t look too closely at the facts.
Two reports in recent weeks caught our attention. Like so many studies and reports in the last decade, they confirm the narrative that bodes ill for California’s financial wellbeing.
First, California is losing more wealthy taxpayers than it is gaining from other states. According to The Center Square which analyzed IRS data, outmigration to other states cost California $24 billion in personal incomes across 2021 and 2022. On top of that, the people leaving California tend to have more money and are more likely to have spouses or children leaving along with them than those entering the state.
With California’s highest in the nation income tax (13.3%) it doesn’t take a rocket scientist to figure out why this is happening. In fact, rocket scientists have figured as well. Famed head of SpaceX, Elon Musk recently established his official residence in the Lone Star State which just happens to have a top marginal income tax rate of zero.
It also probably doesn’t help that when it comes to starting a business, California is one of the worst. The nonpartisan Tax Foundation ranked the state 48th in its 2024 State Business Tax Climate Index.
That likely explains the second report. This one from California’s nonpartisan Legislative Analyst Office on job growth in the state. Although there have been modest gains, the underlying problem is that what little good news there is can be attributed to public spending. This is not an indication of a booming economy.
According to the LAO report, “Since the beginning of 2022, the state’s labor markets have grown modestly but shown some signs of weakness. A closer look at this period unveils a more worrisome trend: large and mounting private-sector job losses that have been offset by continued hiring in public sector (and publicly supported) fields. Since its post-pandemic peak in September 2022, California’s private sector has lost a net 154,000 jobs (1.2 percent) while the public sector has gained 361,000 jobs (7 percent).”
The LAO jobs report presents a “bad news, worse news” scenario. Even as the number of private sector jobs is shrinking, the bureaucracy sustained by those jobs is growing.
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But wait, there’s more. The pay and benefits in the public sector are growing too so it’s not just the number of jobs, it’s how much each one costs. As noted by ZipRecruiter, “Nationwide, government-worker compensation has been growing more rapidly than private-sector compensation for several years, but this trend is on steroids in California, where some state and local government workers are now paid roughly twice as much as those in the private sector.”
This, of course, creates a classic “doom loop.” Less private sector employment means less revenue to sustain a bloated public sector, which creates pressure for higher taxes, which leads to more capital flight. In the meantime, Gov. Newsom just returned from New Hampshire (the state at the top of the list for any presidential aspirant) where he was clinging to Joe Biden like a long lost brother.
For Newsom, a presidential run might be a good strategy to escape California’s doom loop. But somehow, we doubt the voters of America are going to buy what Newsom is selling.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
