I definitely agree on your theory being "insane"
Yes, California may have a 'pseudo-socialist' reputation but that has nothing to do with the fireworks laws. I would say about 50% of the cities that are totally urbanized with little to no adjacent open land have legalized fireworks. If a city is in or near the hills, they are likely to ban all fireworks. Remember it doesn't rain in California from about June to October so July 4th means it is very dry and there is a lot of tinder dry brush to burn. No matter how careful you are, an errant ember can easily ignite this brush.