Let's hope that what happened in California on Election Day doesn't go any further than the Golden State, declares Neeraj Chaudhary of Global Investor Newsletter.
While Democrats celebrated Barack Obama's re-election, a more portentous election took place in California. If state voting trends carry to the rest of the country, we can look forward to continued class warfare, higher taxes, higher spending, and a worsening of the general business climate across the nation.
Often touted as a leader in political and social trends, progressive California swung even further to the left during last week's election. Voters in the once golden state tightened their vice-like grip on businesses and job creators. Voters approved a series of propositions that make the state a more difficult place to run a business and provide jobs.
The biggest headlines go to the passage of Proposition 30, which raises the sales tax by 0.25% for four years and retroactively increases state income taxes for seven years on the 3% of California taxpayers who make more than $250,000 annually. California's top tax rate now goes to 13.3%, by far the highest in the country.
Interestingly, Proposition 30 was competing for passage with another measure, Proposition 38, which would have raised all state income tax rates. By rejecting the broader measure and choosing to soak only those earning more than 250,000, California voters have shown that class warfare is alive and well as a winning electoral strategy.
In addition to the income tax increase for the wealthy, voters also agreed to protect unions' ability to use payroll-deducted funds for political purposes (Prop 32) and to raise taxes on multi-state businesses by approximately $1 billion annually, spending a large portion of this money on "energy efficiency and alternative energy projects" (Prop 39). This is despite the fact that coal remains by far the cheapest source of energy in the world.
Combined with higher taxes, higher energy prices, a higher corporate tax bill, and a continued ability for labor unions to influence policy, this will likely act as a deterrent for businesses to create jobs in the state.
But perhaps the most ominous election development was within the California State Legislature. After the votes were counted, Democrats now control two-thirds "supermajorities" in both the Assembly and the State Senate. Combined with the power of famously left-wing governor Jerry Brown, the Democrats can now completely set the agenda in the state.
The small Republican minority will not be able to prevent Democrats from unilaterally raising taxes or increasing spending. And progressives are chomping at the bit to raise more revenue through the destruction of the decades-old Proposition 13, which limited rates by which local governments could assess property taxes.