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Can California tax its way back to fiscal health?

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    Gov. Jerry Brown's strategy for growing deficit woes

  • Duration 5:39
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We want to be -- Greece or Portugal.

Florida Italy and Ireland and England -- borrowed too much and they get too deep into the hole.

Well it may not -- Greece yet but California's fiscal problems are getting worse with governor Jerry Brown.

Announcing this week that he faces a state budget deficit of sixteen billion dollars almost twice.

The nine point two billion he predicted in Jane for long without.

New round of spending cuts the governor is calling for a temporary increase.

In the state sales tax and a seven year surtax.

On Californians earning 250000.

Dollars or more years.

So will that fix what ails the Golden State.

-- -- -- -- demographer and urban studies professor at Chapman university in California he joins me now welcome to the program.

Nice to be here.

So other states have seen revenues grow in this economic recovery what is wrong with California why can't they do the same.

Well California now has a very top heavy economy got a lot more top heavy with the -- with FaceBook.

You were relatively small number of people -- phenomenal amounts of money.

But the general middle class a small business economy.

Is struggling -- and even today I you have.

And FaceBook goes public in an HP.

Hewlett-Packard announces 30000 layoffs I mean the the fact is that you have very high and success.

But the middle class has been hollowing out has been hollowing out now for at least a decade.

And frankly is that Governor Brown said that's where the money is you know there's only so much money you can take from the very rich there.

Good at hiding it they can as we know apple.

Has moved a lot of its.

Our financial reporting -- other states and other places where they don't have to pay the taxes.

And so you know the middle -- is -- sitting duck but the problem is this and that that's sitting -- is also the key thing that drives the economy.

We'll that I want to ask you about that because that you know that the governor says look I'm I'm we're just taxing the rich we're not hitting the middle class and and you're saying it's not that rich.

Despite the high tax rates that are leaving this state and putting has such bad condition it's the middle class why Weiss why is there's so much pressure on the middle class in California that they're -- Well part of it -- -- -- course course particularly on the coasts.

I mean you have.

If you make 250000 dollars a year you know you and you have a family in California you're not rich even.

500000.

-- in San Francisco Los Angeles.

Very expensive places to live.

And -- lot of these people run small businesses or individual proprietors.

They are they -- a group that that is very very vulnerable to -- these kinds of high tax rates and they're the ones.

Who really drive the economy and and I I just don't see any way.

That we are going to make our economy better by continually.

Raising taxes on on middle class Californians and and so what we're at it we are evolving to and I wrote about this recently in the city journal.

Is we are moving increasingly to a very bifurcated society much more so than the rest of the country and this -- step by Governor Brown we'll probably make it work.

-- -- -- when you say bifurcated you mean that that the rich would do well they'll stay and then though that the relatively poor.

Can depend on government benefits but it's that middle part of the economy the people who make average salaries of little.

Upper middle class salaries are the ones were fleeing to Nevada and Texas and Idaho and Arizona sad is that the point you're making.

Yeah I think that's basically what what's happening I mean there.

And then what what's happening is that we what we see in the population profile pic on the coast of whom I aging population.

Not a lot of young people not a lot of young families.

-- LA in particular suffered a huge out migration of families.

Basically what's happening as we see people coming to California sometimes when they're young.

But leaving when they get a little bit older.

-- and frankly people aren't coming out last year according to the IRS we were I think right around where Michigan is in terms of people as a percentage people coming at.

Don't think about this this is California this is the most beautiful state of the union we have the best whether we still have been some of the great universities.

We have a great infrastructure were right on the on the on the Pacific -- beautiful all the things that should count for an upwardly mobile economy here.

And we're gradually destroying it and by the way I would think taxes are not the biggest problem the biggest problem is a regulatory environment which is enough to drive almost anyone crazy.

And that's regulation on.

Environment it's regulation on energy they have a cap and trade state cap and trade program which imposes.

Those burdens on -- on companies in the stadium and all the rest of the country doesn't have a briefly.

You voted for Jerry Brown has -- been a disappointment.

I've -- I didn't I was somewhat -- I didn't vote for my stomach to know either of them but yeah.

But I have voted for Jerry many times I've known Jerry for a long time.

Longer than I care to admit but I I thought he'd be more innovative more -- that he's he's at the end of this his career.

-- he should be able to risk things -- right now and instead he's playing it.

-- really much more like -- conventional democratic politician.

And I don't think it's gonna get us where we want I think a lot of -- -- Jerry Smart.

He's innovative he's willing to take risks he did it but he was a young man for whatever reason he's not doing it as an older man OK all right -- -- thanks very much.

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