In 2000 about 150,000 people moved into California - in 2008, 135,000 people got out

California's Gold Rush Has Been Reversed. By Devin Nunes
Entrepreneurs are fleeing heavy taxes in the state.

WSJ, Jan 10, 2009

Excerpts:

Tulare, Calif.

On Jan. 24, 1848, James Wilson Marshall found gold at Sutter's Mill, in Coloma, Calif., sparking a mad rush of some 300,000 people desiring to strike it rich. San Francisco grew from a tiny hamlet to a boomtown in no time, and in 1850 California entered the Union as the 31st state.With this history at their back, state leaders might have understood that people have a propensity to get up and move when a better life is to be had elsewhere. But no. After more than 150 years of being a destination, California is becoming a place entrepreneurs, investment capital and the hardy workers who made it a global leader in agriculture, technological innovation and scientific research are fleeing. This exodus is the marker of something deeper than a national recession. It's a sign that the attempts by state leaders to spend their way back to prosperity are killing California.

While it has the sixth highest tax burden in the nation, according to the nonpartisan Tax Foundation, California is facing a breathtaking $40 billion budget deficit this year. This comes on the heels of a decade-long spending spree. Last year the state budget was $131 billion, up from $56 billion in 1998.

Citizens are burdened by all manner of state regulations. To mention just one example, this year a new law enacted by ballot initiative bans cages chicken farmers use on the grounds that it is inhuman to put birds in cages that prevent them from spreading their wings. [...] that will force us to buy our eggs from other states and, possibly, others nations, such as Mexico.

And just as a fallen tree can divert the flow of water in a creek, bad economic policies divert the flow of investment. Entrepreneurs and investors, seeking the path of least resistance, leave when it becomes easier to make a living in more business-friendly states. In 2000, according to the state's Department of Finance, about 150,000 people moved into California. But in the years that followed the in-migration slowed, and in 2005 it reversed, when a net 52,000 people moved out. In 2008, the outflow topped 135,000 people.

Consequently, Idaho, Utah and Wyoming all have unemployment rates around 5% at a time when California is suffering an unemployment rate of 9%. Californians are moving east and creating jobs in their new home states.

Over the past few years, we've witnessed the state government's response to the capital and entrepreneur flight out of our state: Taxes remain high, and lawmakers employ all the tricks in the book to produce "balanced" budgets from shifting expenses around to borrowing ever larger sums of money.

It's now time to turn to the ballot initiative and enact needed reforms that elected representatives in Sacramento have been unwilling to tackle on their own. We're on a dangerous fiscal course, and the people themselves will have to fundamentally change state government to correct it.

Two broad reforms are needed. The first is that we must create a part-time, nonpartisan citizen legislature -- a model that has proven effective in states like Texas (part-time) and Nebraska (part-time and nonpartisan). Californians need to be able to elect leaders whose primary interest is public service, not furthering political careers.

The second fundamental reform is on taxes and spending. Other states have passed a Taxpayers' Bill of Rights. We need to do the same, so I and others will soon be launching a campaign to enact the following:

- Two-year budgeting. [...]
- End budget stalemates. [...]
- New spending controls. [...]
- Refund budget surpluses. When the state government is flush with funds, taxpayers should get some of their money back. We need a mandate for the state to send tax-rebate checks to all taxpayers when surpluses exceed the rate of inflation. Had this reform been law in 2001, that year's $10 billion budget surplus would have yielded each taxpayer a rebate of about $667.

My family has farmed the San Joaquin Valley for three generations. And my first lesson in capital flows came when I was 14. I had cracked open my piggy bank to buy seven head of young cattle to raise and sell. I had two choices: I could buy feed or I could fix fences in exchange for free grazing. Like water flowing down a furrow, my cattle went to pasture where I could make a higher profit.

These are big reforms, but we need to stop buying feed to eat for today and start mending fences to make the state better off in the long term. California commerce can again be the envy of the world if we fix the problems that created the financial and economic crisis.

The bottom line is that we should let the water of prosperity flow again unobstructed into our state. If it does, investors, businesses and jobs will return to the Golden State.

Mr. Nunes, a Republican, is a congressman from California.