California’s Cover Charge

(Steven Hayward)

California has always been like a trendy nightclub that can get away with a hefty cover charge because everyone wants in. I once asked Arthur Laffer, of the famous curve, how California could keep getting away with such a high cover charge—i.e., high taxes and crushing regulation—when virtually no other state could get away with it. I was expecting a technical economic term—”exploitable asymmetries”—that is, the great climate and abundant natural beauty that many people are willing to pay a premium to enjoy (like me), but no. Instead, he said, “That’s like asking why pretty girls are mean. Answer: Because they can.”

But maybe California can’t any more. Even the pretty mean girls age, and start to show wrinkles, gray hair, and such. The Census data showing more middle class people leaving California than coming in reminds of the old Yogi Berra line about a popular New York restaurant: “Nobody goes there any more; it got too crowded.”

The latest IGS/Berkeley poll reports the following:

As Californians confront Tax Day, April 15 the latest Berkeley IGS Poll finds that about two in three voters (64%) consider the federal and state income taxes that they and their family have to pay are too high. This represents a ten percentage-point increase in the proportion of voters who said this six years ago, the last time a comparable question about income taxes was included in a statewide voter poll.

Contributing to the growing perception that income taxes are too high is the fact that many Californians report that their economic fortunes have declined over the past year. The poll finds twice as many voters now describing themselves as financially worse off than a year ago (42%) as report being better off (21%). Six years ago, the reverse was true with about twice as many voters saying they were financially better off than in the prior year (48%) as felt they were worse off (25%).

If you take a closer look at Table 3 of the poll, it looks even worse—the number of people who think thinks will get better, and the number of people who expect their own prospects will get worse—are at all time highs going back 60 years.