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California's Mysterious War on Gasoline Cars

Stocks in this article: GM F TM

NEW YORK ( TheStreet) -- California will soon have the country's highest state income tax rate at 13.3% and red tape for almost every kind of business is strangling profitability.

The high level of government spending, record pay and retirement benefits for government bureaucrats make Greece look conservative and California is spinning in the direction of the biggest bankruptcy of all time. Unemployment is among the country's highest, despite the world's best farm land, Hollywood and Silicon Valley.

With this trainwreck of an economic calamity, why do people voluntarily still choose to live in California? The answer is the unbeatable fresh air, the flawless climate, the best weather in the world. I call this "air/climate/weather."

In California you don't need to be worth $10 million to feel rich -- you only need a park bench and the open sky. There is no money in the world that can buy this air/climate/weather. You could be Donald Trump, but if you're living in New York, you're poorer than the poorest Californian when it comes to the air/climate/weather experience.

Some will argue that California's signature industries -- Hollywood and Silicon Valley -- are the main attractions for living in California. This explanation, however, doesn't really answer the question of why those industries in turn are in California to begin with. If California didn't have the country's -- and the world's -- best air/climate/weather, chances are that those industries would do what their employees would do: swiftly locate themselves to places with lower taxes, less red tape and no looming state bankruptcy.

With this as a background, please consider California's obsession to eliminate most regular gasoline cars from the sales column. According to the state government, over the next decade or so, the sale of regular gasoline cars will be curtailed in favor of "zero emissions" vehicles, such as electric cars and hydrogen fuel cell cars.

In order to achieve this goal, the California government is forcing auto makers to produce and sell increasing quantities of currently primarily electric cars. These quantities have been modest until recently, but over the next couple of years, these required sales of various classes of electric cars ramps up materially: 1.5 million of them by 2025.

This poses an obvious market problem: Imagine that the government mandated that for each restaurant McDonald's opens, it needs to also open five vegan restaurants where only tofu and rice cakes are served. Furthermore, for every beef burger sold, they would also need to sell five rice cake and tofu salads. How would you like that? How would McDonald's like that?

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