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The California Disease

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Last week the Wall Street Journal ran a Steve Malanga column on all that ails my home state. The heart of the problem: taxes and torts. Key graphs:

California taxes are high and hit employers and employees hard. While the highest individual income-tax bracket, 10.3%, applies to million-dollar earners, the second-highest, 9.3%, kicks in at $47,000. Even in high-tax New Jersey, the top bracket of 8.97% doesn’t kick in until filers hit $500,000 in income. California also has a high corporate tax rate of 8.84%.

The state’s legal environment is a mess, too. A so-called consumer rights law allows trial lawyers to sue firms for minor violations of California’s complex labor and environmental regulations. After lawyers kept sending out threatening letters in mass mailings to thousands of small businesses, demanding payments in return for not suing over purported minor paperwork violations, outraged voters passed the Prop. 64 reform initiative in 2004. Yet that only forced suing attorneys to first show that they were representing plaintiffs who claimed to have been harmed.

California also allows plaintiffs to sue for damages over even minor violations of the Americans With Disabilities Act’s architectural guidelines for accommodating the disabled. One plaintiff alone has sued 1,000 businesses, mostly restaurants, and won an average settlement of $4,000. Using an obscure provision of California labor law that requires stores to have enough seats for all employees, trial attorneys have filed about 100 lawsuits, claiming damages of up to $100 per employee, against chain retailers.

Read the whole thing.

Because my law firm defends large corporations against many of these sorts of claims, I am particularly alert to third party confirmation of the reality we advise our clients on every single day. But even the best legal advice cannot stop strike suits over an insufficient of chairs in which to sit.

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