California's High Tax / High Benefit Model: A Constantly Renegotiated Bargain 8 comments
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California's high benefit/high tax model of government - a subject that was once very near and dear to my heart, but one that now only generates casual interest since we left the state earlier this year - is examined by William Voegeli in this report in the Los Angeles Times.
In America's federal system, some states, such as California, offer residents a "package deal" that bundles numerous and ambitious public benefits with the high taxes needed to pay for them. Other states, such as Texas, offer packages combining modest benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over what it means to get the size and scope of government right.
It's not surprising, then, that there's an intense debate over which model is more admirable and sustainable. What is surprising is the growing evidence that the low-benefit/low-tax package not only succeeds on its own terms but also according to the criteria used to defend its opposite. In other words, the superior public goods that supposedly justify the high taxes just aren't being delivered.
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One way to assess how Americans feel about the different tax and benefit packages the states offer is by examining internal U.S. migration patterns. Between April 1, 2000, and June 30, 2007, an average of 3,247 more people moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas had a net weekly population increase of 1,544 as a result of people moving in from other states.
In the years before we left, we heard many stories of people moving from California to Texas but none about people moving the other direction.
At one point, even your average homeowner could sell his house in the Golden State and, with the profits, buy a brand new 3,500 square foot place in Texas on an acre of land.
This doesn't happen much anymore (for obvious reasons), but people are still leaving. These folks pulling up stakes and driving U-Haul trucks across state lines understand a reality the defenders of the high-benefit/high-tax model must confront: All things being equal, everyone would rather pay low taxes than high ones. The high-benefit/high-tax model can work only if things are demonstrably not equal -- if the public goods purchased by the high taxes far surpass the quality, quantity and impact of those available to people who live in states with low taxes.
There's a day of reckoning coming for public sector workers in California, that is, unless they get the housing bubble inflated again - that seems to solve many problems ... temporarily.
Today's public benefits fail that test, as urban scholar Joel Kotkin of NewGeography.com and Chapman University told the Los Angeles Times in March: "Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California. Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California's government and the middle class is constantly being renegotiated to the disadvantage of the middle class."
These judgments are not based on drive-by sociology. According to a report issued earlier this year by the consulting firm McKinsey & Co., Texas students "are, on average, one to two years of learning ahead of California students of the same age," even though per-pupil expenditures on public school students are 12% higher in California. The details of the Census Bureau data show that Texas not only spends its citizens' dollars more effectively than California but emphasizes priorities that are more broadly beneficial. Per capita spending on transportation was 5.9% lower in California, and highway expenditures in particular were 9.5% lower, a discovery both plausible and infuriating to any Los Angeles commuter losing the will to live while sitting in yet another freeway traffic jam.
In what respects, then, does California "excel"? California's state and local government employees were the best compensated in America, according to the Census Bureau data for 2006.
If not, things are going to be pretty grim for the state's budget for some time to come.
I don't recall where this was, but a recent news report said that the total budget deficit for all fifty states in the new fiscal year is expected to be in the hundreds of billions of dollars.
The stimulus money from Washington that helped balance many state budgets this year appears to have only pushed the problem back a year.
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1. The most rapidly declining quality of material life in the US and possibly the Western world
2. Potentially the first significant polity in the New World to attain Third World status in another generation if current pathologies are not reversed
3.Hostility to small business , the entrepreneurial class and genuine risk capital that rivals Venezuela and Iran
4. An entrenched, callous, kleptocratic and corrupt elite that becomes richer and more totalitarian by the month : a true inspiration to its moral and intellectual twin in Russia
5.Tangibly declining quality of all municipal, county and state services, especially education, physical infrastructure and public health combined with visibly rising costs
6 Extinction of real jobs, income and net worth for real people at a pace that sets a new standard for moral, cultural and intellectual bankruptcy
Never in the history of any large State in the America have so few harmed so many, so much, so fast.
High Taxes+ High Regulations +High Corruption = Emerging Failed State
The greatest benefit that California provides is a salutary lesson and warning to New York, Michigan and Illinois : reverse course or follow California over the precipice.
It also allows beleagured Middle Class Americans in the rest of the country to go down on their knees in gratitude that they are not captives of the People's Republic of California. They fully realize how much worse things can be ....
There is both a quality-of-life argument auguring in favor of these simple words and an economic one. As to the former, no one who believes in the nation envisioned by our Founding Fathers wants a more intrusive government prying, nanny-ing and enforcing arbitrary rules into our private lives.
But the economic argument is equally compelling and may be stated in the simplest terms via an analogy. All bookies depend upon the spread between opposing bettors and the bookies’ cut of your winnings or losings. Their ideal is to get a 50/50 betting pool where exactly half the bettors win and half lose. With their cut -- the vigorish, or “vig” – they live a fine life no matter what happens to the bettors.
The Los Angeles Times article asks and answers, “In what respects, then, does California ‘excel’? California's state and local government employees were the best compensated in America.” You cannot continue to raise the amount of vigorish taken or you will lose the betting public. We have a choice of bookies to use, and the article makes it clear that California is losing residents at a massive rate.
It is both disheartening and unnecessary. I was born in California. I attended a great California university, joined the Army and did my basic training in California, and still love the land there. Close your eyes and try to pick another state that can offer wonders like Yosemite, Carmel and Monterey, Shasta, the great breadbasket that is the Central Valley, Southern California beaches, the Giant Redwoods, San Francisco Bay, the Wine Country and the celebrated Sierra Nevada Mountains.
Yet with all those glories, I can no longer live there. Instead, I live a few minutes from the California border, high in the Sierra Nevada but in the magnificent western state of Nevada, a state where the level of regulation and level of taxes are a fraction of those in California – and the level of freedom and personal responsibility are orders of magnitude higher.
California leads the nation in physical beauty. It is blessed with a temperate and beautiful climate. Fresh clean water roars out of the Sierra every year onto some of the most fertile soil in the world. So how could this bounty have been lost? Taxes. Regulations. Overpaying ticket-takers and rubber-stampers while penalizing entrepreneurs and employers.
The tragedy is that it is completely self-inflicted. But the trend is not yet irreversible. California could once again be the leader in education, innovation, entertainment, agriculture, and energy that it once was. It is this generation’s object lesson that the type of governance we choose makes all the difference in the world.
Those two groups keep Michigan in the death spiral of losing workers and increasing non-workers.
The public servants hold us hostage - with surly attitudes and working less while crowing about catastrophe - the non-workers guilt and entitle themselves into ever better circumstances.
Small business men are portrayed as "evil," and greedy, we all cheat our taxes, underpay our workers and have pallets of $100s sitting around.
My hometown has a population less than 2200. It is one of 3 cities in Michigan to have an income tax and at one point was the HQ for the largest screw machine company in the country. In 2004, when the town was shedding business at a record rate, the town convinced the idiot citizens to levy an ADDITIONAL tax on property.
Results? No new business. The closure of multiple existing business and rental units sitting empty as the population can no longer afford the rent the "rich businessmen" have to charge.
Now, this thought process has overtaken WDC. Just how long do we think it is going to be before those that have the money leave and those that work and are barely scraping by have to readjust to even less?
But I'll take San Francisco over Dallas, and LA over Houston summer or winter. Sacramento versus Austin, you have an argument. I have a small business in the Golden State, and through careful and legal tax-minimization techniques, my taxes are quite manageable, lower than in other states I've worked and owned. The beauty and the weather and the people and the food and the nature facilities are fantastic.
CA has to clean its act up, but it's most because of its super-majority budgetary system. Too many highly paid municipal union workers, for sure, but I have to say in permits, courts, police, emergency workers, I am startled by how much competence and decency I encounter, so much greater than in the East or the middle South. People are also consistently friendly, pretty smart, helpful -- something I've found a rarity though much of the rest of the world, and even in large parts of the U.S.
That said, I've nothing in terms of bad experiences with Texas -- just a little distaste for their over-zealous executions (I know it's very popular in Texas, and it's for Texans to decide; just hate parts of our country to be in such tight concert with Saudi Arabia, Iran, and China on this expensive, mistake-prone retribution).
Why, I can even see clearly the San Bernardino mountains in the summer. Something which was impossible before the Greater Depression hit.
So, some things are getting much better but the state fiscal situation will take years to sort out.
In the meantime, I'll take the near perfect weather along with the continuously improving traffic and air quality, and am only sad that it took millions losing their jobs or leaving the state to improve the quality of life here.
To ZSMARTMONEY who wants to "...lose California, New York and Massachusetts (and Chicago, if just a city could secede). You know, just dump them. They're an albatross around the neck of the rest of the US....." : Well, actually, YOUR state may be an albatross around the neck of the U.S.! Without those states that pay more and get back less, your state would be starved, and you would either have to pay higher taxes or decide what services to give up.
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YOUR VIEWS: Liberal states pay more in taxes, complain less
By Bob Blalock -- The Birmingham News
September 14, 2009, 5:30AM
The state of Alabama receives $1.71 for every $1 it pays in U.S. taxes. And of the 10 most conservative states cited in The News' front-page story of Aug. 19, each state receives more federal benefits than it pays in taxes. Mississippi receives the most ($1.77), Wyoming the least ($1.11). But all 10 receive more than they pay.
How, then, can one escape the obvious? The states that extend their hands the farthest toward government are the very states which complain the loudest about paying taxes and government's intrusion into their lives.
The other list was a list of the top 10 most liberal states. All but two of those, Vermont and Hawaii, give more than they receive. New Jersey gets only 55 cents for every dollar it sends to Washington; New York and California get 79 cents; Massachusetts gets 77 cents.
Those states may not be what you would call "cheerful givers," but they give more and complain less. There may not be a church on every corner in those liberal states, but I will hazard a guess that those liberals better grasp the concepts of "brother's keeper" and "good Samaritan" than many of their conservative brothers who are always so public with their religion.
Ironies and hypocrisies abound.