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California faces a deficit of $16B, Governor Jerry Brown said yesterday (video), not the $9B...
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Sunday, May 13, 2012, 2:57 AM ETCalifornia faces a deficit of $16B, Governor Jerry Brown said yesterday (video), not the $9B he'd estimated in January. The ballooning gap is due to tepid tax revenues and slow progress in slashing budgets, which Brown blamed on the federal government and the courts. One bit of hope is Facebook's IPO, which could bring in $2B. (see also)
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There. Fixed it for you.
these so called boondoggles include the best university system in the world, and attempts at creating world-class infrastructure.
There's a reason that the most innovative companies in the country are headquartered in California, and not Georgia. Note also that CA has a 25% higher GDP per capita than Georgia.
Why do some of most advanced and most profitable companies make their homes in California? Why do some of the best and brightest students come out of California's university system? Why isn't Apple actually located in Delaware?
Yes, CA has a serious budget problem and they need to address it, but you can't pretend that the state doesn't achieve a lot of value for all its spending, especially at the state level (the municipalities are another story).
What you're talking about is so 1998. The state is imploding.
"But how do you get out of a tax load that large? Simple, just renounce your US citizenship, and, poof, no more US taxes up to a point. Of course, renouncing US citizenship is not something that should be taken lightly, but for some, the value of a United States passport might not equal a tax bill that amounts to millions of dollars.
Enter Eduardo Saverin, one of the original Facebook four, who still owns a good-sized piece of Facebook. How big? This big: Saverin's stake in Facebook is roughly 4% and valued around $3.84 billion.
Let’s run our numbers again, just for fun. 15% of 3.84 billion is a stunning $576 million dollars. So, would it surprise you that Mr. Saverin recently gave up his US citizenship? It shouldn’t. For proof, check the list. He’s out of here."
http://tnw.co/JwUyfB
In fact, they're all OUT OF HERE.
http://1.usa.gov/J8Dyxv
Wanna tax the rich? Want their 'fair share'? Time to be patriotic, eh Biden?
HAHAHAHAHA.
They're all GettingTFO.
Buh bye america. It was nice knowing you.
Yes, why do they? I can understand why they incorporated there back in the 60s and 70s but who would start up a new company in a state that is so hostile to business while welcoming with open arms the invasion of illegal aliens and the ensuing additional tax load? The chickens have come home to roost in California.
At 2T, California's GSP (gross state product) is the nations' largest and it's growing at a respectable 3.1%/y -- not a mega boom but far from a recessionary rate. California's state welfare costs are a mere 1% of GSP v. the 2.3% of GSP that "libertarian" Vermont spends on welfare.
California's state-level debt is 6.65% of GSP, above North Dakota's 6.55% but well below Kentucky's 7.52%, Missouri's 8%, or Montana's 12.77%, and far below the 18.89% of Romney's Massachusetts.
Source:
http://bit.ly/J0B0me
That's the CA I grew up in (18 years ago). I am a product of that University system (UC Irvine). Trouble is I left for Texas 18 years ago and many businesses, entrepreneurs, and innovations went elsewhere too. Silicon Valley is still great, but it is no where near the same CA where I grew up.
The unions provide nothing. The deficit is not an aide to what made CA great. In fact, my buddies kids got sent to University outside California due to cost. I think it is a shame that once great University system can no longer serve it's own residents.
With the right priorities the state can be fixed, but preserving the deficit by pandering to vote buying unions is no solution. And Republicans with "blood oaths" against taxes are wrong too. I think a more moderate and pragmatic approach is needed. I sincerely wish you well. Things worked out for me, I hope for the same for those I know that are still there.
http://bit.ly/vi8oS6
Or better yet, why don't states like Alaska, Alabama, or Oklahoma just send a check for the proportion of funds that they leach from California. That'll help. Then CA can get to the business of cracking down on the corporations and millionaires that evade taxes via Prop 13.
If they pass (especially the Prop-13 changes), however, you'll have anew form of evasion. People with wealth will merely "evade" California.
Just to demonstrate how incorrect this is, about a year ago there was an article referencing wealth migration patterns in the U.S. In it, they highlighted the five U.S. counties with the highest outward migration and the five with the highest inflows. Where do you think these were?
The five highest outflows were led by #1, Santa Clara County, followed by four others in MA, NY, NJ, and MD, all high-tax states. The five highest inflow counties were all in FL and TX, two states with no state income taxes.
In fact, the laws of economics do work, even despite beautiful mountains, etc. I, myself, know this because I am a former Santa Clara County resident, who, now, lives in Florida, even though I visit CA frequently.
"The proportion of Californians who had moved here from out of state reached a 100-year low of about 20% in 2010, and the decade measured by the most recent census was the first in a century in which the majority of Californians were native-born.
The demographics of California today more closely resemble those of 1900 than of 1950: It is a mostly home-grown population, whose future depends on the children of immigrants and their children, said William Frey, a demographer and senior fellow at the Brookings Institution.
"We used to say California, here we come," said Frey. "That now has flipped."
Experts point to various causes of the turnaround, most of them rooted in a flagging economy. But exorbitant housing prices — too high for many struggling Californians despite a burst housing bubble — still play a role."
http://lat.ms/KWqWfi
Most of the remaining inflow is from Mexico, and long-suffering California taxpayers have been forced to provide benefits to all comers.
The particular case of Santa Clara County is a good example because this county has been the scene of one of the greatest bouts of wealth creation. There is net migration of wealthy out of Santa Clara County, but this is almost a mathematical certainty when the amount of wealth created there greatly exceeded most of the rest of the country. Now I don't deny that FL or TX are creating a lot of wealth right now compared to other places, but really the effect you are seeing is that generally poorer states are in the gradual process of catching up with the richest states. It is no coincidence that the 5 states with highest net flows are the richest per capita (if discussing wealth flow), and highest population density (if discussing population flow).
Here is an article, written by sociologists who properly control for non-salient and salient factors. Honestly compare the quality of the academic article to the study by an industry lobbying group.
http://goo.gl/eRIj8
Did you really move to Florida because of you didn't like your income tax rate?
BTW, there is an exception for high income people in traveling professions (like famous sports athletes) who don't necessarily spend a huge fraction of their time in the place of residence.
Thanks for the intelligent dialogue. It's refreshing.
You raise good points, and, as an engineer by collegiate education, I fully appreciate the analogy to thermodynamics. However, I am not sure the analogy directly applies. First off, the outward migration isn't going to the "poorest" states; it's going to those with the lowest taxation. There's a difference. Furthermore, past migrations didn't see wealthy people move to poor regions; they saw poor people move from wealthy regions to poorer regions because they sensed opportunity. Now, that doesn't occur because the wealthy states engage in socialism, which blunts the need for them to improve their situation.
Personally, I moved away from Silicon Valley because, after twenty years in the maelstrom, I needed a change. My wife and I considered Monterey County, but she grew up there and was never a fan of the "cold" (as she describes it) weather on the coast, so we wound up on Florida's gulf coast, where we visited every year, anyway, and where I have a sister living. Economics, too, played some role, as we sold our house in CA at the very week the realty market frenzy peaked in 2000 and bought a gorgeous waterfront home in Sarasota that would have been laughably expensive in CA. Since then, we realize how fortunate we've been, as our home here as appreciated very substantially (even after the recent housing declines) and we don't face myriad personal taxation issues that confront Californians, now. We still have many friends and family and visit CA frequently, but we also know that any passing thought of relocating back there would be most economically imprudent.
I am refreshed as well, arguing with someone who is smart, but more importantly attempts to be intellectually honest.
I think my analogy is good, although admittedly I'm no sociologist. A particularly cool piece of evidence for the analogy is looking at the net flows of wealthy people between poorer states with high taxes (not many by the way), and richer states with low taxes (also, not many of these). One stark example is the net flow between Hawaii (poor) and Alaska (rich), for which the lobby-group funded "studies" would prepare you to believe there would be an overwhelming flow from Hawaii (high tax) to Alaska (low tax). In fact there is a slight flow in the opposite direction.
The "study" should be ringing alarm bells to you because it is obvious that they haven't controlled for ongoing changes in the level of urbanization, or ongoing changes in productivity, or even obvious situations like resource booms. TX and other inflow states are only now (slowly) catching up in levels of urbanization, and levels of productivity, that are seen in the outflow states (and they are still pretty far behind, so the trends will continue barring some major economic forces). It has nothing to do with taxation, except for the fact that the states that have more ground to cover are generally those that tend to be red state. Additionally, in some particular low density, resource rich, red states, like Alaska, TX, OK, ND, the relative level of job creation is further boosted by natural resources.
by the way, in Florida I think there is currently a net domestic outflow right now.
The study cited relies heavily on 1998 study and a Canadian study. Additionally, their data is before the 2010 census results as well as tax revenue results for 2007. There is substantial migration from high tax states to lower tax rate states, as well as the extremely wealthy moving out of country. The 2010 census clearly shows CA population growth was purely native with the biggest decline in 100yrs from people moving into CA. This is classic demographic decline signal. Regardless of what one wishes to point to as the cause....the fact is....it is happening.
http://bit.ly/M9hpRi
http://onforb.es/I6pRPX
Add Illinois to your list. Recent analysis blames the not-long-ago overnight 40% increase in the Illinois income tax with the reality that Chicago's realty market has recently been among the nation's weakest.
When Governor Davis sought to take back state control over the grid and end the bloodsucking, Bush told him he wouldn't allow that. As Enron continued to suck wealth out of the state, Davis finally decided to go rebel and defy Bush. Almost immediately, Enron CEO Ken Lay flew out to California, visited an actor named Arnold Schwarzenegger and next thing you know Davis has been replaced by this Schwarzenegger guy. Enron eventually got busted criminally and when they did, Governor Schwarzenegger forgave his Enron benefactors all but 0.5B of the 13B stolen from California.
It's the same issue in Illinois.
Moving from correlation to causation is a tricky business and there are plenty of people with axes to grind but punitive taxation on capital and incomes is going to show up at some point.
We just had a little cocktail-party smooch, not a genuine love affair. :-)
I live and own a small business in California. This is my second and last business in this state. I'll sell it in the next year or two and will incorporate and run my next business from Nevada where we will buy a house and live for 50.1% of the year.
I've already got one very successful friend doing this and I know of another who is thinking about it. This is on top of two friends who have left for Texas and Nevada already.
For me, it's not the taxes in California as much as the hostility to businesses exhibited by our wonderful state. In 18 year in business I've twice had a complaint filed by ex-employees. The first we won in court after the EDD auto awarded him 65% of the gross profit on a large sale we made that he assisted in as a trainee.
The second time was absolutely incredible. I was subjected to the most hostile interview I've ever seen in my life by the EDD. Hostile is a nice word. We won that case also by the way.
If I ever go before the EDD again I'll find some type of small video and audio recorder to tape the meeting in case I'm subjected to the same level of hostility. It would be a real eye opener for the majority of people who don't run businesses.
I will never again start a business in this state.
Having only TWO people file claims in 18 years in this state is a miracle.
During this Trainee's first three months the Account Manager had an opportunity at one of his clients. He ended up closing the sale of about $40,000. At this time we were a network integration company. The trainee new nothing of computers much less of networking so he could not have handled the sale by himself whatsoever which is what he claimed he did.
At the EDD hearing he stated that he had handled the sale that was worth $100,000 (he didn't have the size right) and that the gross profit was $40,000 and I had promised him $10,000. Our compensation structure paid 25% of gross profit so he said he was due $10,000.
The mistake I made was that I had not created a position directive for this new position so I had nothing that said he wasn’t paid commission during his training period. I did show his offer letter which stated during the three months of training he would be paid x dollars an hour. However, that offer letter didn’t say he wouldn’t be paid commissions. I pointed out that he was terminated weeks before we got the signed quote, he didn’t know the deal size and didn’t have the background or the skillset to handle this sale. I pointed out that no business is going to pay commissions to two sales people for the same sale. That was all meaningless to the commissioner and she awarded him $10,000 on a total sale of $40k (about 65% of the GP).
So I got my lawyer involved. In California, employees have nothing to lose in filing a claim. If they lose the hearing then they are only out a little bit of time. If they win the hearing which they do a large percentage of the time then the business can take it to a court but if they lose they have to pay legal fees for both parties. If the employer wins they cannot get legal fees from the plaintiff. Employees in California literally have nothing to lose and it is impossible to keep up with all the rules and regulations in this state. I have no doubt that if I was audited for every possible rule I would be in violation of some even though we work hard to meet them all. This has created a group of people who move from company to company suing them.
So my lawyer started taking depositions from me, the Account Manager who handled the sale, our Accounting Manager and then hat in hand I went to the client and asked the two executives who we worked with if they would testify to which they agreed.
Of course this person didn’t want to actually go to court because they would lose so we settled for $2k. We agreed on $2k because that was half of the minimum number my lawyer said I would spend in legal fees if we continued to court. So the cost to my company was a lot of stress, scores of hours for me and my staff, $2k to this crook and $5k in legal fees.
There was no mistake or misunderstanding. He knew he wasn’t entitled to commissions and he only marginally assisted the Account Manager in putting the proposal together. It was more than a year after he was terminated that he filed the claim. That is California and the burden of the rules and regulations combined with the hostility that our state government shows towards businesses is why this business will be the last businesses I ever start in California.
just let the unions have it. it will work out pretty much like Greece.
or maybe Warren Buffet might like to help close that gap too. what lunacy that was, like offering martinis at the AA meeting.
the deficit.California congress controlled by democrats can not see it.
We have our selves to blame for voting for them so they can continue to spend like drunk sailors.
In a word, it is corruption. And in the end there is nothing new under the sun.
http://bit.ly/J29qol
Kind of says it all.
http://bit.ly/ISagiJ
Unemployment is still far too low. However, since Brown took office, it's been improving at a faster rate than the national average. Additionally, since Brown took office, hiring by the state government is down compared to what it was in 2010 under his Republican predecessor, Schwarzenegger. That means that the faster-than national job growth in California is entirely due to private sector growth.
There is simply no objective measure under which you can, with honesty, say that Brown has been "a disaster".
Horse Poo!! The California legislature (aka The gang that couldn't shoot straight) left CA with a NEAR $20B deficit in Arnie's last year in office.
2009-2010 Budget Expenditures -- $206B
2010-2011 Budget Expenditures -- $216B
2011-2012 Budget Expenditures -- $214B
source: http://1.usa.gov/KUYhBD
Last budget deficit under Arnie was around $19B
Current deficit under Moonbeam to be around $16B
Hmmm, looks a lot like $3B "cuts" (smoke and mirrors?) to me.
All of these points can be looked at two ways. California is still a very large economy (juggernaut). But if you average out the government spending on the State and federal level it is losing steam. SD's 3% y over y ignores the low base from last year (hopefully the housing bottom). The fact is CA needs to get back to attracting new business to keep the juggernaut alive. Right now they have had little success in that direction for several years.
I think one could make a fair argument that Californians have benefited from (though are no longer receiving) extended unemployment benefits. However, if you want to make that point then I think you also need to look at the fact that Texas plugged its own yawning deficit gap using money from the feds: http://read.bi/w0afiz
Things are often not what one expects based on stereotypes. Texas avoided the carnage of the housing boom and bust that ravaged the other sunbelt states largely because of stricter down payment requirements and other state financial regulations, including Texas state consumer protection rules. In other words, it was...wait for it...government regulation, imposed by the state of Texas, that helped Texans weather the financial crisis better than the other sunbelt states:
http://on.wsj.com/JUiA2P
http://bit.ly/Jafhcs
Here's another fact about Texas that may not fit the stereotypes: the Houston ballet is one of the world's top ballets and has attracted what may be the world's greatest living ballet choreographer, British-born Christopher Bruce. Here are clips from are two of his glorious creations, performed by the gifted Houston Ballet:
http://bit.ly/KDicHV
http://bit.ly/IPonqn
Keep up the good work, Texas.
Also from 1948 to 1984 Texas was a swing state, voting like new York in every presidential election.
Again you tell only a small part of the story. The Texas homestead rule was longstanding. So it was no new regulation, it's more like Texas avoided modern financial engineering that CA tried to use for an expanding tax basis.
The issue with CA should not be measured by GSP which is boosted heavily by government stimulus. Rather the unemployment rate and business creation are the better measurements. Here you will see the Texas unemployment rate has remained under national averages and the state has rapid expansion in key industries like oil and gas. Also trade (through NAFTA) has supported several industries. In short, the regulations have not been in the way and the real economy grows. Meanwhile, CA regulation continues to crowd out entrepreneurs in favor of government bureaucrats.
I'm no believer in stereotypes SD, but clouding the issues to deny the truths makes little sense to me. CA must raise the revenue to pay for the government they created and they must be honest about the effect of this much government. This was true 18 years ago when I left and I feel the state still remains in denial to this day.
One personal aside, when I left everyone I knew thought I was crazy to leave "paradise". Now, nearly all of those same people have left as well. "Paradise" did wilt once I had a comparison. The sad truth is the rich old people got the money and the best places to live in CA and the ambitious younger people left. To be totally crass, the older and richer I get the more I hate rich old people. Sad really.
Texas had several legislative constraints that prevented it from overparticipating in the housing boom (I posted links). The Texas homesteading rule that prevents creditors from seizing one's home was not one of them, however.
I'm glad your move worked out for you. You seem to have some personal animosity against whoever didn't applaud you at the time, which is unfortunate. I've visited Texas on several occasions. It's not somewhere I'd want to live but that doesn't prevent me from recognizing the good things that are there -- including a number of people with whom I've had worthwhile discussions.
All these Texas accomplishments are Bush's fault! LOL.
It is too big and cannot be managed and they don't even know what is going on in the governors office.
A news search for $100k pensions and California makes an interesting read. When you consider that most in the military don't get this as a retirement, yet put their lives on the line, it should be no surprise people get pissed off about public worker pensions.
Obviously other states have similar problems with their pension systems, including underfunding and declaring unrealistic gains that limit worker contributions. Probably one of the odder things in California that has made the news often, especially in San Diego, is the proliferation of 100% or higher pension payouts. Maybe if it was restricted to police and firefighter who actually face some danger in their work, there might be some public sympathy, but invariably we find paper pushers and desk jockeys getting these lavish pensions.
If there is a budget shortfall in California, it is quite simple to see that the amount being spent annually is exceeding the amount collected in taxes and permits. According to the most recent census, there are 37691912 people living in California (2011 data). Rather than further gouge them to make up for the $16Billion "shortfall", how about cutting that out of public worker pay?