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California’s Post-Tax Hike Jobs slump is signal to Texas to cut taxes, continue growth

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March 19, 2013 | 3,108 views | Post a comment

California’s $50 billion tax hike may push the nation into recession

AUSTIN -- Newly revised state employment data from the federal Bureau of Labor Statistics (BLS) paint a cautionary tale of how public policies, such as taxes and regulation, can put Americans out of work.

In its first jobs report for 2013, the BLS revised state employment calculations for two years of data. The new statistics show that Texas continues to be the nation’s leading job creating state, with 581,300 jobs added from January, 2011 to January, 2013. California added 488,600 jobs in the same period with a civilian workforce some 47 percent larger than Texas’. Over the past 12 months, Texas saw an increase of 310,900 jobs vs. California’s 254,900. Texas employers created 22 percent more jobs than did counterparts in California in the past year.

In January, Texas continued to outpace California, adding 10,400 jobs to California’s 1,700 jobs. California is tied with Rhode Island for having the nation’s highest unemployment rate: 9.8 percent. Texas’ unemployment rate is 6.3 percent while nationally the official unemployment rate is 7.9 percent.

California passed a $50 billion tax increase in November 2012, giving the state the nation’s highest income tax, retroactive to January 2012. In the three months since the tax hike went into effect, California’s job creation pace slackened to half of what it was in the preceding 22 months after the state’s temporary taxes passed in 2009 expired. Texas’ job creation pace was essentially unchanged in the two periods, and, for the last three months, is about three times higher than California’s at 0.21 percent job growth per month vs. California’s 0.07 percent. Both California and Texas have seen a modest reduction in government jobs over the past two years, with 2.8 percent fewer Texans working for government vs. a 2.6 reduction in California.

“This should come as no surprise to anyone who’s been following the growing burden of taxes and regulation on California businesses,” said Chuck DeVore, Vice President for Policy at the Texas Public Policy Foundation and a former California State Assemblyman. “California voters voted to boost taxes by $50 billion in last November’s election, increasing income taxes retroactively, as well as increasing the sales tax rate and vehicle taxes too. Now, California workers are paying with a static job market.”

The Hon. Talmadge Heflin, the Director for Fiscal Policy at the Texas Public Policy Foundation, said, “California’s sluggish economy following a tax hike should serve to encourage the Texas legislature to phase out and eliminate the Texas business franchise tax as a way to further boost jobs in Texas.”

DeVore is the author of the recently published book, “The Texas Model: Prosperity in the Lone Star State and Lessons for America” available on Amazon.com. In the book DeVore highlights the key governmental policy differences between Texas and other large states. DeVore explains how low taxes, limited government regulation, and a lawsuit climate that doesn’t overly burden business have together acted to increase job creation and entrepreneurship in Texas.

The Texas Model has been widely received and continues to gain praise.

Chuck DeVore’s “...new book ‘The Texas Model’ ...describes the key ingredients to Texas’s economic success.” -- Wall Street Journal

“DeVore's statistical reply to the critics of Texas' economic model is devastating and convincing. If you want to get a panhandle on why Texas’s ‘Prosperity Model’ works, buy Chuck DeVore’s book.” -- Wayne Lusvardi, Cal Watchdog

Chuck DeVore is the Vice President for Policy at the Texas Public Policy Foundation. He served six years in the California Assembly and is a Lt. Colonel, United States Army (retired) Reserve.
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