Overreliance on a few companies will not work in the long run
through Joel Kotkin
Whisper it, but the $45 billion surplus that Gavin Newsom has predicted for California next year isn’t quite what it seems. In fact, most of that surplus is largely due to earnings from a few giants such as Google, Apple, and Meta (formerly Facebook), as well as a handful of IPOs.
This inconvenient truth hasn’t stopped the governor from proposing a record $286.4 billion budget that will focus on education, health care spending for undocumented residents and expanding the country’s already massive social spending. ‘State.
Indeed, even with a surplus, the state legislator seems determined not to lower taxes but to raise them. Newsom plans to implement a single-payer health care system funded by massive new corporate taxes and higher revenues, raising what is already the highest rate in the country. On top of that, the legislature seems ready to impose other wealth taxes on the very wealthy who keep the state afloat.
Yet the reliance on the elites – the 1% who account for half of state income tax – could prove troubling once the current stock market boom ends and the image of the IPO darkens. The state’s tax and regulatory regime has already stifled most other sectors of the economy, including blue-collar industries like manufacturing, energy and construction. And much of that has been accelerated by a growing corporate exodus, including iconic companies like Tesla, Oracle, HP Enterprises, Charles Schwab, Bechtel, Parsons Engineering and others. Meta would have bought thirty-three floors in an Austin skyscraper.
Despite claiming to be America’s start-up capital, California executives ignore or simply dismiss any notion of economic peril. But the reality is stark: it is a state that suffers from the highest cost-of-living-adjusted poverty rate in the country, the largest gap between the middle class and the wealthy, some of the most overcrowded housing, and the second lowest ownership rate. Post-pandemic, it also has the highest unemployment rate in the country.
These facts are rarely discussed in the predictably pro-Newsom media. The party line is that such attacks reflect the political bias of right-wing haters. Yet what California needs is not media or academic accomplices, but a willingness to confront the emerging neo-feudal structure of the state which, amid unprecedented wealth, has not doing much for most locals. Only a course correction and a change of consciousness can restore the state to its former greatness.