Every state's tax code is a story of winners and losers; a historical record often heavily influenced by special interests and circumstances unique to that state. California's tax code has been designed by wealthy real estate developers who pay relatively little in income tax due to depreciation. Proposition 13 has been an incredible transfer of wealth from wage earners to the real estate industry. This is rentier capitalism and does little to promote Silicon Valley's brand of innovation, unless you view high housing costs as a useful mechanism to filter potential migrants. If California had opted for higher property taxes and lower income taxes, then I suspect it would be even more vibrant and dynamic than the admittedly successful State we see today. Other states, notably Texas, have taken such an approach: very high property taxes and no income taxes.