As the result of the 2012 state election returns, California will be significantly increasing taxes on businesses and residents to assist in closing the state's enormous budget deficit. The concern that many policy makers and business leaders have is that these actions will only exacerbate the negative trends that have contributed to the slow California economic recovery and fall significantly short of meeting the goal of reducing the state deficit.

In a recent article in The Orange County Register newspaper, author Bill Watkins of California Lutheran University's Center for Economic Research reported the California's population is "flat-lining" and is on serious life support. According to the California Department of Finance, the state's population has remained stagnant for seven consecutive years growing at only a sub-1-percent rate which is a clear sign of limited employment and business opportunities in California. This slow growth rate is the result of negative domestic migration, declining international migration and declining births due to young families leaving the state.

As the author Watkins observed, the process becomes self-reinforcing. Employers leave. The tax base deteriorates. School quality deteriorates.   The pressure increases for upwardly mobile families to move away leaving two populations, one wealthy and one poor.

This trend is further supported by a recent Manhattan Institute study titled "The Great California Exodus" which details the fact that California has experienced a net negative domestic population migration to other states in 18 of the past 20 years averaging 196,000 per year. Population change and migration patterns that shape it are important indicators of fiscal and political health; and California's chronically out-of-balance budgets are seen as tax hikes waiting to happen.

Further reinforcing this adverse trend, the respected Tax Foundation recently published their "2013 State Business Climate Index" which enables business leaders, government policymakers and taxpayers to gauge how their state tax systems compare with other states. California had the dubious distinction of ranking 48th among all the 50 states with the third-worst overall tax ranking. Despite California's moderate property tax and unemployment insurance tax rates, the state ranks overall third from the bottom by having the second-worst individual taxes, sixth-worst corporate taxes and eleventh-worst sales taxes among all 50 states. Only New York and New Jersey have a lower ranking than California.

This negative image was further reinforced earlier this year when the Chief Executive Magazine released their rankings of the worst states to do business in. They ranked California 50th among all states for the eighth year in a row. Once the most attractive state for business, California has one of the highest unemployment rates, one-third of the nation's welfare recipients and for the first time in decades California is losing population as people migrate to other states that offer greater opportunities.