Bottom of the Barrel in Economic Freedom

Ellen and I, with friends, attended the Annual Mercatus Center Retreat in Scottsdale AZ last month. Browsing the table of available publications I spotted one on Freedom in the 50 States, and thumbed to the section on California. Out of the 50 states, California is listed as 49th, right at the bottom. What interested me was the lack of change since 2009. Here is what the report has to say about the California Policies that shape economic freedom, where California ranks 44th, withs two points of improvement since 2009. However, in the regulator category California is number 50, at the very bottom.

California not only taxes and regulates its economy more than most other states, but also aggressively interferes in the personal lives of its citizens.

Government consumption (at 11.0 percent of personal income) and employment (at 12.8 percent of private-sector employment) are about average, but debt is high (at 25.8 percent of income). The budgetary categories on which California spends significantly more than the rest of the country include general administration, housing and community development, utilities, and employee retirement. Individual and business income taxes are well above average. The total tax burden comes to 10.8 percent of income, a standard deviation above the national average.

Government interference in the land market is rife, as California’s zoning laws are among the toughest in the country, and the state is one of just four to authorize rent control, while eminent domain abuse has seen only token reform. Labor laws impose many costs on employers, from the minimum wage and a universal workers’ compensation mandate to short-term disability insurance and paid family leave. Health insurance mandates add about 49.5 percent to the cost of a premium of a policy without any of the mandated benefits. However, there is no community rating, guaranteed issue, or prior approval of rates in the nongroup health insurance market. Occupational licensing is rampant, and the nursing professions are tightly regulated. The state’s liability system is one of the poorest in the nation and has gradually worsened over time. The life and property/casualty insurance markets are among the most regulated in the nation. On the plus side, there is no certificate-of-need (CON) law for hospital construction.

More details can be found HERE. It is easy to see why companies are leaving California and few are coming to the state. Net migration rate is -4.5%. These larger trends make the Nevada County Economic Resource Council’s job much more difficult.

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About Russ Steele

Freelance writer and climate change blogger. Russ spent twenty years in the Air Force as a navigator specializing in electronics warfare and digital systems. After his service he was employed for sixteen years as concept developer for TRW, an aerospace and automotive company, and then was CEO of a non-profit Internet provider for 18 months. Russ's articles have appeared in Comstock's Business, Capitol Journal, Trailer Life, Monitoring Times, and Idaho Magazine.
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2 Responses to Bottom of the Barrel in Economic Freedom

  1. Russ Steele says:

    Here is an axample of regulatory abuse in California from Fox and Hounds:

    One of the reasons California has been named the country’s No. 1 “Judicial Hellhole” again this year is that it still abets runaway lawsuits against businesses, mostly small businesses, that are in violation of the Americans With Disabilities Act. A reform was passed two years ago after Sen. Dianne Feinstein threatened to take action nationally if the state didn’t rein in abusive ADA lawsuits. But, alas, the “reform” was a cynical ploy. It appeared to be effective but it just allowed plaintiffs’ lawyers to take a different tack. And now they’re back at it, shaking down mom-and-pop shops for $4,000 or more if the coat hook on the bathroom door is an inch too high or some such. (For more, see the article in the March 24 issue of the Los Angeles Business Journal.) There’s a simple fix: give businesses a reasonable time period to fix their ADA violations – say, 60 days for minor violations to six or nine months for major, structural ones. That way, the businesses aren’t being shaken down and the buildings are made accessible to the disabled, which is what the ADA was supposed to accomplish. If the businesses don’t comply within the time period, fine, sue away. And then we’ll see if the plaintiffs’ lawyers – many of whom claim they’re only filing ADA lawsuits for the benefit of the handicapped – will still “represent” the disabled when their handsome payday is taken away. – See more at: http://www.foxandhoundsdaily.com/2014/04/count/#sthash.HEz7H5D0.dpuf

    One has to wonder, are Nevada County business targets of this kind of abuse?

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  2. Russ Steele says:

    California, another relatively high-tax jurisdiction with a top rate of 12.3 percent (13.3 percent on income over $1 million) was also a net loser of wealth over the time studied [1992-2010], with a net outflow of $45.3 billion. The two largest recipients of the flow of wealth from California were Nevada, which has no income tax, and Arizona, which has a top rate of only 4.54 percent. – See more at: http://www.thefiscaltimes.com/Articles/2014/03/17/High-Tax-States-Are-Losing-Billions#sthash.11gkv9yK.dpuf

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