On the Cusp of Catastrophe, California Has No Margin for Error

by Victor Davis Hansen,

Californians brag that their state is the world’s fifth-largest economy. They talk as reverentially of Silicon Valley companies Apple, Facebook, and Google as the ancient Greeks did of their Olympian gods.

Hollywood and universities such as Caltech, Stanford, and Berkeley are cited as permanent proof of the intellectual, aesthetic, and technological dominance of West Coast culture.

Californians also see their progressive, one-party state as a neo-socialist model for a nation moving hard to the left.

But how long will they retain such confidence?

California’s 40 million residents depend on less than 1 percent of the state’s taxpayers to pay nearly half of the state income tax, which for California’s highest tier of earners tops out at the nation’s highest rate of 13.3 percent.

In other words, California cannot afford to lose even a few thousand of its wealthiest individual taxpayers. But a new federal tax law now caps deductions for state and local taxes at $10,000—a radical change that promises to cost many high-earning taxpayers tens of thousands of dollars.

If even a few thousand of the state’s 1 percent flee to nearby no-tax states such as Nevada or Texas, California could face a devastating shortfall in annual income.

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