Los Angeles Business Journal

California Trapped in State of Rising Taxes?

OP-ED By Arthur F. Rothberg Monday, December 10, 2012

Political rhetoric like “making the rich pay their fair share” might sound nice and even help win elections. But, unfortunately, raising taxes on upper-income individuals does very little, if anything, to help grow the economy or reduce debt and deficits in the real world. In fact, it usually results in just the opposite.

Demonized by politicians

Just think about it for a minute: Who actually creates the jobs that are critical to turning the economy around? Middle-income wage earners? Poor people who are living on government assistance?

Of course not. New businesses and jobs are created primarily by the upper-income individuals who have been so demonized by many politicians.

These “evil rich people” just happen to primarily be the entrepreneurs and business owners who make decisions about where to start and locate their companies, how much new real estate and equipment to buy, and how many employees to hire.

Will they choose to start, grow and expand their businesses in a city or state (or nation, for that matter) where entrepreneurship is encouraged through low tax rates and minimal government regulation? Or where tax rates are high and government red tape and bureaucracy are overly burdensome?

Unfortunately, a report recently published by the Manhattan Institute, “The Great California Exodus: A Closer Look,” does not paint a pretty picture for our state.

Due to high taxes, burdensome regulations, lack of public-sector reforms and a lackluster job climate, more people have left California than moved here since 2005. California is no longer “perceived by most Americans as the land where dreams come true,” the report concludes.

The report states that since 1990, almost all of the net migration into California over the preceding 30 years (4.2 million people) has been wiped out as people and businesses relocated to states with better economic climates, lower taxes and less government regulation.

“More often than not, people move because there is a better opportunity elsewhere,” the report states. “Families looking for economic opportunity travel to Texas now,” where the economy has been booming. Those families once traveled to California, but no longer, according to the report, because companies “set up shop where conditions are more conducive to making a profit.”

As an L.A. entrepreneur, it hurts me deeply to read statistics like these. I strongly believe in the future of our great state, but I do not see ever-higher taxes as the solution to our financial problems.

To the contrary, I see them as exacerbating the problems. Let’s change our fiscal course right now — before it’s too late — and restore California to its rightful place as one of the greatest and fiscally sound states in the nation.

Arthur F. Rothberg is the managing director of CFO Edge, a provider of outsourced CFO services in Pasadena.

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