California has one of the nation’s highest levels of government spending and taxes, and it adversely affects the state’s economic competitiveness, according to a new report by the conservative, San Francisco-based Pacific Research Institute.
Titled “Taxifornia,” the study by Robert P. Murphy and Jason Clemens found that state and local government spending in California is the nation’s fourth-highest at 18.4 percent of its economic input. Alaska is highest at 20 percent and South Dakota lowest at 11.6 percent.
The data represent a new wrinkle in California’s perpetual debate over spending and taxes, since comparisons usually focus on tax burdens. The authors said they looked at total spending so that it include spending out of fees and borrowed money, as well as tax receipts.
The PRI report was especially critical of California’s high marginal income tax rate and its reliance on high-income taxpayers. “If policy makers want to understand why the Golden State is lagging behind other states economically,” the report said, “the punitive and steeply progressive personal income tax code is a good place to start looking.”
However, the report doesn’t ignore taxes, placing California among the nation’s highest-taxing states, especially personal and corporate income and sales taxes, and suggests that they are inhibiting California’s economic progress. A liberal counterpart organization, the California Budget Project, has labeled California a moderate tax state.