What happens when you increase the tax burden on companies in order to correct a state deficit? Those companies start leaving. Companies are run by people and people are generally willing to put up with only so much abuse until they analyze their situation and consider their options. California has been increasing taxes on businesses and it’s now to a point where many businesses there have decided it’s simply not worth being there and are taking their services and jobs to another state.
In 2011 the rate of businesses leaving California has increased to 5.4 a week. Each of those businesses are also taking their jobs with them meaning the unemployment rate in California is going to continue getting higher. This is also a great demonstration of the fact that states simply can’t tax their out of debt. As they increase their tax rates the victims of those increases are going to leave and then will effectively pay $0.00 in taxes to the state.
California, like most socialist nations, is finally collapsing under it’s own ruined economy. They’ve tried to offer too much for too long and now they’re going all Soviet Union. Governments need to learn that the only way to effectively eliminate their debt is to spend less money. People will survive without government services but they won’t take loosing 90% of their earnings. I’m pretty sure it’s too late for California but I hope my state notices this and learns that increasing taxes on businesses and the wealthy (those who generally own businesses) is not going to reduce our debt but increase it in the long run as tax payers flee for friendly states (South Dakota is right next door and they’re generally pretty nice in comparison).