Removing restrictions in the exhaust doesn't hurt performance. Forget what is "common knowledge" about backpressure and all of that, proper exhaust flow is what makes power. That far downstream, the muffler if not plugged up, has little bearing on power production. (when talking about an exhaust system as restrictive as the trucks from the muffler forward)
About the CA thing, it shouldn't be an *emissions* violation to remove it. Noise ordinances could certainly cause problems though.