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California vs. Texas: The Verdict Is In

Texas, increasingly, is the economic and intellectual leader of the U.S. During the last 18 months before the current recession took hold, while the country as a whole was still creating jobs, more than half of those jobs were created in a single state: Texas.
Texas has usurped the leadership position that, decades ago, belonged to California. Today California is in decline, likely irreversibly so. William Voegeli draws the sad but instructive comparison in the Los Angeles Times:

In America’s federal system, some states, such as California, offer residents a “package deal” that bundles numerous and ambitious public benefits with the high taxes needed to pay for them. Other states, such as Texas, offer packages combining modest benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over what it means to get the size and scope of government right. …
California and Texas are not perfect representatives of the alternative deals, but they come close. Overall, the Census Bureau’s latest data show that state and local government expenditures for all purposes in 2005-06 were 46.8% higher in California than in Texas: $10,070 per person compared with $6,858. …

Confronted with a stark choice between government dominance and freedom, Americans are voting with their feet:

One way to assess how Americans feel about the different tax and benefit packages the states offer is by examining internal U.S. migration patterns. Between April 1, 2000, and June 30, 2007, an average of 3,247 more people moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas had a net weekly population increase of 1,544 as a result of people moving in from other states. During these years, more generally, 16 of the 17 states with the lowest tax levels had positive “net internal migration,” in the Census Bureau’s language, while 14 of the 17 states with the highest taxes had negative net internal migration.

That’s not hard to understand. As Voegeli says, “All things being equal, everyone would rather pay low taxes than high ones.” So high-tax states like California have to be able to show that their taxes are somehow worth it:

Today’s public benefits fail that test, as urban scholar Joel Kotkin of NewGeography.com and Chapman University told the Los Angeles Times in March: “Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California’s government and the middle class is constantly being renegotiated to the disadvantage of the middle class.”
These judgments are not based on drive-by sociology. According to a report issued earlier this year by the consulting firm McKinsey & Co., Texas students “are, on average, one to two years of learning ahead of California students of the same age,” even though per-pupil expenditures on public school students are 12% higher in California. The details of the Census Bureau data show that Texas not only spends its citizens’ dollars more effectively than California but emphasizes priorities that are more broadly beneficial. Per capita spending on transportation was 5.9% lower in California, and highway expenditures in particular were 9.5% lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam.

But those higher taxes in California must be going somewhere. Why aren’t they benefiting those many thousands of citizens who are leaving the state for greener pastures?

In what respects, then, does California “excel”? California’s state and local government employees were the best compensated in America, according to the Census Bureau data for 2006. And the latest posting on the website of the California Foundation for Fiscal Responsibility shows 9,223 former civil servants and educators receiving pensions worth more than $100,000 a year from California’s public retirement funds. The “dues” paid by taxpayers in order to belong to Club California purchase benefits that, increasingly, are enjoyed by the staff instead of the members.

No doubt similar studies in other high tax states, like my home state of Minnesota, would show the same thing: taxpayers aren’t getting anything in particular for their money, likely less than citizens in other states, but public employees are doing very well indeed. This explains why public employees’ unions have become the Democratic Party’s most loyal supporters, while those who are not on the public employee gravy train increasingly are packing up their belongings and moving to lower-tax states like Texas.
The debate, really, is over. High-tax states don’t deliver a better lifestyle–not for taxpayers, anyway. One of these days, voters will figure out that the same thing holds true at the national level. Higher taxes may be OK if you’re a public employee; otherwise, they’re a dead loss.
SCOTT adds: See also Voegeli’s City Journal essay “The big-spending, high-taxing, lousy-services paradigm” and Voegeli’s related column Time is on California’s side.”

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