Millions Flee the Most Liberal State in the Union

In their recent book, “Why Nations Fail: the Origins of Power, Prosperity, and Poverty,” Daron Acemoglu and James Robinson point out that over the past 22 years, 3.4 million Californians have quit the state in favor of states and nations that have lower tax rates. The causes of this mass exodus has not been taxes, alone. Other factors have been excessive business regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs.

California has been naturally blessed in the past with some of the most attractive natural resources in the world. California has nearly 850 miles of pristine Pacific Ocean coastline; some of the world’s most breathtaking forests, deserts, and mountains; abundant oil, gold, and agricultural resources. In the heavily populated coastal regions, is located one of the world’s very rare Mediterranean climates—warm summers and a relatively warm, very wet winter—this combination, along with the fertile soil will grow almost any agricultural product needed by man. Grafted on top of that natural bounty is an equally impressive cultural abundance: the verve for experimentation and innovation that birthed the entertainment industry in Southern California and Silicon Valley in the north.

But…what happened? The Golden State is beset by high unemployment (10.6 percent in August, behind only Rhode Island and Nevada) and consistently ranks as the nation’s worst business atmosphere.

What’s the reason for this social catastrophe? Bad government, high taxes, and overly enthusiastic business regulation. All this coupled with a penchant for buying things where there is no money to pay for them. For instance, California recently voted to fund a multimillion dollar project to study and advance the use of embryonic stem cells, a technology with very questionable probable outcomes.

Across the nation, states that embrace free-market principles are beating jurisdictions that prefer big government to within an inch of their lives. The conclusion is—states should be more like Texas and less like California.

States with unobtrusive government fare much better than governmental behemoths like California.  A comparison between the nine states with the highest and lowest tax burdens, for instance, shows remarkable disparities:

During the decade that ended in 2010, GDP in the low-tax states grew by 20 percent more than in the high-tax jurisdictions. Population growth in the low-tax states was nearly four times greater than in the high-tax states. And the low tax rates didn’t exactly make paupers out of the states that embraced them either; those jurisdictions actually realized substantially larger increases in the growth of state and local tax revenue than did their more confiscatory brethren.

The conclusion is obvious: States that embrace conservative policies – low taxes, restrained regulation, free labor markets, a friendly business environment consistently outperform states where big government carries the day.

Oh! How I wish the United States federal government could learn this lesson from the states.