More Taxes or More Jobs? California Shows We Can't Have Both

It's hard to find a politician who isn't eager to "do something" about high unemployment.

Turns out California has found one way to save and create certain kinds of jobs—spend like mad and raise taxes.

That job-creation strategy has worked quite well for government-sector workers. Problem is the statewide unemployment rate is still among the highest in the nation, and many private-sector employers are heading to states like Texas, where taxes are lower and regulations are lighter.

"I would love to have companies calling me saying, 'We'd like to move to California, can you help us with that relocation?' I get none of those calls," says business relocation coach Joe Vranich. "The calls I do get are, 'Hello, we want to move out of California, can you help us do that?'" Vranich says there's no one reason why businesses leave.

He calls it "death by a thousand cuts," where job creators get fed up with everything from high taxes to traffic gridlock and legal hassles.

Take Rick and Jack Newcombe, the father-son team that runs Creators Syndicate. A long legal battle with the city of Los Angles might end up being their company's final cut. The Newcombes say the city arbitrarily stuck the company into a higher tax category and officials are applying the hike retroactively. City officials are demanding $400,000 in back taxes, but Rick Newcombe calls the whole episode "legalized theft," adding that a tax penalty of that size would force the company to lay off 10 employees.

It's ironic that such drama unfolds in a city where Mayor Antonio Villaraigosa is always doing something—transit projects! green jobs!— he hopes will stimulate the economy.

And steep statewide unemployment persists long after Gov. Arnold Schwarzenegger eagerly accepted billions in federal stimulus funds. In fact, the Bush-Obama scatter shot of bailouts, stimuli, and rescue plans has fallen well short of proponents' promises.

Want to create and save jobs? Maybe it's time for politicians to stop doing so much and start undoing some of their worst blunders.

"More Taxes or More Jobs?" is written and produced by Ted Balaker, who also hosts. Camera-Animation: Hawk Jensen; Associate Producer: Paul Detrick; Additional Photography: Alex Manning.

Approximately seven minutes. Go to http://reason.tv for downloadable iPod, HD and audio versions of this and all our videos.

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