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The Texas vs. California Election

The presidential election will tell us a lot about whether Americans want the country to look more like California or Texas. 

The Golden State has embraced almost every liberal idea. Indeed, “embraced” isn’t strong enough; “initiated” would be more accurate. It may be the closest thing we have to President Obama’s vision for the country. Add in Chicago’s corrupt political machine and what you have is Obama-topia. 

According to the Cato Institute, California has the second highest individual tax rate in the country, 10.3 percent. And Governor Jerry Brown wants to kick it up to 13.3 percent, which would make it the highest income tax, surpassing Hawaii’s 11 percent rate. Brown also wants to increase the state sales tax to 7.5 percent from 7.25 percent, which is already the highest in the country. The corporate tax rate of 8.8 percent is the ninth highest in the nation.

The state has by far the most stringent environmental regulations, and it’s eager to pass more. And, like Obama, the state legislature loves costly green projects, like the bullet train that the governor keeps trying to fund. 

The result of California’s high-tax, high-regulation, tepid-economic-growth culture is that individuals and businesses are fleeing the state for better environments, such as Texas. And it’s easy to see why.

Texas has no state income tax, though it has struggled to get its business tax right. It replaced its corporate franchise tax with the “Texas Margins Tax,” which few people seem to be happy with. But that reform wasn’t an attempt to raise state revenue, because property taxes were reduced. 

Texas Governor Rick Perry has been steadfast in balancing the state’s budget by cutting spending rather than raising taxes. And the light-tough regulatory environment has been a boon to the state economy. The editor of Chief Executive magazine told me that there are two constants with respect to the publication’s annual survey of CEOs on the best place to do business: Texas always comes in first; California always comes in last.

The result is that people and businesses are flocking to Texas, and many of them are coming from California. 

If President Obama wins reelection, he will try to push the country to look more like California; if he loses, he may want to retire in California. If Governor Mitt Romney wins, he will strive for something like a Texas model. 

Regardless of how Americans vote at the polls, we know how they vote with their feet. The Texas model wins.