By: The Editorial Board – wsj.com – March 23, 2025

California had a jobs recession in 2024, Texas had a jobs boom.

Private businesses shed jobs in the year, including in construction (-28,600), manufacturing (-33,400), information (-11,700), finance (-21,800), professional and business services (-49,000), leisure and hospitality (-29,500) and retail (-4,300). Some job losses are a result of small businesses closing because of high taxes and other costs.

These include California’s $16.50 an hour minimum wage and $20 for fast-food restaurants. The state’s Private Attorneys General Act lets trial lawyers extort small businesses by filing dubious lawsuits for alleged labor violations. Most businesses pay off the attorneys in settlements because defending against the lawsuits would cost even more.

Large companies are also relocating workers to lower-tax and -cost states. Texas added 187,700 jobs over the same period with gains spanning all industries, including construction (19,800), manufacturing (4,200), information (200), finance (19,000), professional and business services (19,700), leisure and hospitality (11,300) and retail (13,900).

The Lone Star State added only about a quarter as many jobs in healthcare, social assistance and private education as California. Texas spent about $50 billion on health and human services compared to California’s $228 billion.

Democrats in Sacramento can’t blame Donald Trump or the wildfires in January for the state’s paltry employment growth. Employment declined between January and September 2024, but then surged in November and December, as in the rest of the country, after Mr. Trump’s election. Jobs were flat between December 2024 and this January.

One problem for Democrats in Sacramento is that their progressive tax regime (with an effective top marginal rate of 14.5% on wage income and 13.3% on investment income) has made the state budget increasingly dependent on high earners whose incomes are volatile. The top 1% of earners contribute about half of the state’s income-tax revenue.

California’s economy is also becoming more dependent on government spending, including federal funds, which totaled $162 billion last year. A stock market correction and slowdown in federal spending could open gaping budget deficits that might force cuts in government spending, resulting in layoffs in the few areas still adding jobs.

You won’t hear about any of these #Californiaproblems on Gov. Gavin Newsom’s new podcast interviewing MAGA men—nor from the progressives lambasting him for reaching out to Donald Trump supporters. A growing problem for Mr. Newsom’s national ambitions and his party is that California epitomizes the leftist policies that harm workers and employers. That’s why so many are leaving for Texas.

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Source: A Tale of Two States on Job Creation – WSJ