They are remarkably waterproof.  Game the rules all you like and they will find ways around them, or just move their capital to an environment that isn’t so hostile to it.  Politicians endlessly create and exploit loopholes but arrogantly assume that no one else is as clever as they are and will do the same.

Driven by a combination of bad planning, a lack of understanding of  basic economics and plain old coveting*, California is now doomed to fail.

See Californians flee to red states at Haemet.

In the five-year period from 2005 to 2009, 870,000 people left California.  Most of them went to red states, like Arizona and Texas, wherein jobs are more plentiful, taxes are lower, and housing prices are lower.

Problematically for California, the type of people who leave a failing state are the ones that a state most needs.  The educated, the wealthy, and the ambitious are the ones who will pack up and move, taking their human capital, their assets, and their earning capacity to other states.  Most of the people who stay are the ones who need the strong and able to carry them.  California is on its way to a death spiral, wherein everything it will need to do will only exacerbate its problems.

This why we need simplified tax structures.  Yes, some will take advantage of them, but they always will.  Having a tax code multiple times the size of the Bible is doomed to fail.  It just increases bureaucracy and wastes money.  We also need to get rid of public-sector unions and radically cut back the welfare state.

* Remember that one?  It made the top 10 list.