That California produces the worst “return on investment” for its citizens is demonstrably true.
As measured by WalletHub, California ranks 49th out of 50 states in taxpayer return on investment and the Tax Foundation rates the state 48th in tax competitiveness. It would be one thing if we were receiving value for our tax dollars but, put bluntly, we are not. The Golden State has the highest income tax rate in America as well as the highest state sales tax rate and gas tax. Even per capita property tax collections are much higher than the national average, Proposition 13 notwithstanding.
Yet with all this revenue, the state’s efforts to address homelessness, education, transportation, and crime have produced outcomes that fall short of what other states achieve.
Further, what Californians find incomprehensible is that even with record levels of revenue, our political leadership continues to claim we have a budget crisis. To ordinary taxpayers, this makes no sense.
In an attempt to explain how we got into this mess, California’s Legislative Analyst just issued a report entitled “Understanding $100 Billion in Spending Growth: Causes and Fiscal Implications.”
While the report is illuminating, it still leaves the taxpaying public with more questions than answers.
First, the LAO acknowledges the extraordinary growth in revenue over the last six years, from $146 billion in 2019-20 to $248 billion under the governor’s budget proposal for 2026-27. According to the report, “about 70 percent of this spending growth went to sustaining services that already existed in 2019-20 while 30 percent went to expanding or creating new services since that time.”
Second, the LAO notes how Proposition 98, which guarantees about 40% of the state’s general fund goes to education, resulted in a huge increase in spending on schools. But taxpayers who are paying attention can rightfully question this increase given that California public school enrollment has fallen for eight consecutive years, dropping to 5.8 million students in 2024-25, a loss of 31,500 students from the previous year.
Here’s why citizen taxpayers simply can’t relate to the politicians who claim we have a budget deficit when tax revenue is at an all-time high. Let’s assume a typical family with two earners. One makes $80,000 annually and the other $40,000 for a total family income of $120,000. Except for modest contributions to their savings and retirement funds, they pretty much spend most of what they make every year, after taxes, under a well-organized family budget.
But now assume the spouse who makes $40k annually loses his or her job. Under the common sense understanding of a “deficit,” the family will need to significantly reduce spending by $40k or tap into their savings or, worse, draw down their retirement funds. Until the spouse finds new employment, the family has a $40k deficit in their annual budget.
That is a real world deficit.
Now suppose that instead of one spouse losing his or her job, the spouse who makes $80,000 gets a raise that doubles their pay to $160,000. Nice, right? Their family income is now a comfortable $200,000 annually.
But rather than live within their new, much higher income, the family goes crazy and buys a Ferrari, goes out to eat at nice restaurants every night, and takes trips to exotic locations. Feeling good about themselves – and bragging about how special they are – they start spending $300,000 annually on $200,000 income.
The question now is, does this couple really have a $100,000 deficit? To the average common-sense Californian, the answer is of course not. They just lacked the discipline to restrain their spending even when the available revenue went way up.
But the only difference between our fictional couple and state politicians is that the politicians are spending your money – and you don’t even get a Ferrari.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.