california

[luke warm]

calif leads the nation in progressive policies, most of them approved of by the people... but now, according to this article, it's become increasingly difficult to pay for some of those things

 

"The voters are getting what they asked for, but I'm not sure at the end of the day they're going to like what they asked for," said Jim Earp, executive director of the California Alliance for Jobs, which represents the hard-hit construction industry. "I think we've crossed a threshold in many ways."

 

governments, whether state or federal, have long believed that spending with little or no thought to paying the bill is an indefinite thing... it's very easy to give people what they want until you start asking them to pay for it...

[Elianna]

When you only need 50+% to pass a spending bill, but 66+% to pass a tax bill, something's gotta give.

 

As I recall, it was not the liberals in California who passed Prop 13, which basically freezes things like property taxes. I know of someone who owns a 2mil+ home, and (LEGALLY) pays taxes on it as if it's a 200,000+ home. And this person is nowhere near the only one.

 

Of course, it was the progressive party that got us this stupid initiative process, where the lawmakers can't seem to make a decision and the voters must approve almost everything.

[Lobowolf]

When you only need 50+% to pass a spending bill, but 66+% to pass a tax bill, something's gotta give.

 

As I recall, it was not the liberals in California who passed Prop 13, which basically freezes things like property taxes.  I know of someone who owns a 2mil+ home, and (LEGALLY) pays taxes on it as if it's a 200,000+ home.  And this person is nowhere near the only one.

 

Of course, it was the progressive party that got us this stupid initiative process, where the lawmakers can't seem to make a decision and the voters must approve almost everything.

It was pretty much everyone (ok, it only 2/3 - 1/3) who passed Prop. 13.

 

From a good-sized surplus not too many years ago, if spending had been increased pegged to inflation and population growth, we'd still have a surplus in the billions. Revenues actually outpaced population growth and inflation by a fair amount, but spending has almost doubled in about a decade. We generally have and have had politicians who (combination of the following in varying degrees):

1. were stupid enough to think that the tech boom would continue uninterrupted ad infinitum;

2. were ignorant enough not to understand that budget increases not designated to terminate continue ad infinitum (i.e., it's not like buying a new car because you made a lot of money this year - it's like hiring a chauffeur...whom you have to pay NEXT year, too, even if you don't make a lot of money).

3. are completely in the pocket of some of the state's more powerful unions (largely but not exclusively state workers).

 

Whatever the cause, it's pretty much been a bunch of little kids ordering everything off of every infomercial that says "bill me later," and when the bills came, wanting to sneak into dad's wallet or mom's purse and keep ordering more cool stuff for themselves and all their friends.

 

It's really astounding how quickly and completely the state's finances went into the tank, particularly with the highest or almost the highest income tax, sales tax, and gas tax in the country, and looking to extend the record. Apparently, we've finally gotten to the point where the voters will only accept one answer -- SPEND LESS *****IN' MONEY!

 

About time.

[awm]

California ranks 47th in effective property tax rate, as a percentage of property value.

 

While California's gasoline tax is the 3rd highest among states (after NY and WA), the tax on cigarettes is 28th (with many states charging more than double CA's rate) and the tax on hard liquor is 35th (with many states charging more than triple CA's rate). California's taxes on tobacco and liquor are not particularly high.

 

In fact there is strong evidence that voters support higher "sin taxes" as well as closing tax loopholes for corporations and the wealthy, and that the opposition to the propositions was not really based on "anti-tax" sentiment. Most voters strongly oppose Gov. Schwarzenegger's proposed cuts in education funding, where "progressive" California is already way behind the national mean.

 

The fact that California's return per federal tax dollar is among the least of any state may also be a factor in the budget issues and high tax rates.

[hrothgar]

NPR's "On Point" devoted an hour to Caliornia's fiscal crisis on Thursday.

 

The State Treasurer stated that the emergence of the revenue crisis over the last decade was primarily due to

 

1. A significant increase in the prison population

2. Tax cuts

 

Anyone who wants can listen to the show at http://www.onpointradio.org/2009/05/califo...too-big-to-fail

[hrothgar]

It's really astounding how quickly and completely the state's finances went into the tank, particularly with the highest or almost the highest income tax, sales tax, and gas tax in the country, and looking to extend the record.

During said podcast a claim was made that the existing income tax structure is too progressive.

 

The State's income taxes are extremely dependent on taxing a relatively small number of extremely high net worth individuals which, in turn, impacts the variance of the State's revenues. (The income of said individuals tends to be more exposed to down turns in the stock market, tech spending, etc)

 

The Democrats (supposedly) are looking for ways to distribute the burden across more folks.

 

Personally, I think that the State cuts its own throat with Proposition 13...

 

I think that the easiest way to address the problem would be to legalize pot and forgive a large number of folks who were sentenced under the old laws.

 

You would simultaneously

 

1. Significantly decrease the prison population

2. Avoid lots of expenses associated with enforcement

3. Create an exciting new tax base

[awm]

While I don't have a very strongly held opinion about marijuana legalization, it seems that there are not that many people in prison just for marijuana. Legalization probably would not have that much direct effect on the prison population or state costs, especially because a lot of the "traffickers" would be likely to find other illegal ways to make large amounts of money...

 

Of course, taxing the stuff might be a different story.

[jdonn]

Why does that study exclude people with criminal histories? That history might be more marijuana use, and in any case it seems completely irrelevant, like saying it's ok to jail anyone who has ever committed any crime any time you want throughout their life.

[Phil]

California ranks 47th in effective property tax rate, as a percentage of property value.

Caliifornia is 1st or 2nd in total taxes in the country. Don't forget about our nice healthy sales tax and 11% income rate.

 

Whatever problems Sacramento has are not going to be solved by upping the taxes.

[kenberg]

Like Adam, I don't care all that much one way or the other whether marijuana is legalized. I suppose I slightly favor legalization more or less on the grounds that it seems like a waste of effort trying to stop it.

 

Living in Maryland I don't wake every morning fretting about California's troubles, I wish them well.

 

Of course things we want should be paid for. It's an old problem, going back to George Washington having trouble getting the cash to pay his soldiers. Here is an anecdote from my youth:

 

In St. Paul in the 50s, much school spending had to be submitted to the voters. No kidding. Anyway, a spending initiative was defeated at the polls, the school system announced that it no longer had money to fund athletics, resubmitted with an agreement to restore athletics if it passed, and it passed overwhelmingly. 50 years later I still find this instructive. We must deal with people as they are.

 

Everyone wants to tax someone else. I am not rich, I don't smoke pot, I don't buy lottery tickets, I don't play slots. Hey! Let's tax rich people, tax pot, put in state run lotteries and slots. Add in state run poker website and maybe I can never pay taxes again.

 

I wish that there was a broad consensus that education, police, etc are worth the money even if, gasp, it means paying taxes. Wishing doesn't make it so.

 

I realize I don't know anything about California. I imagine you cannot have taxes far in excess of nearby states and expect a large influx of business even if it has many wonderful places. Which it has. Driving the coastal highway is a kick.

[helene_t]

When you only need 50+% to pass a spending bill, but 66+% to pass a tax bill, something's gotta give.

Lol. And this poll about the train from SF to LA was about a proposal that didn't state anything about how it would be financed? How can one vote on such a scheme without knowing what taxes will be raised?

[mike777]

It does sort of sound like increasing taxes by alot may be the way to go for Calif. They might also simply borrow alot more money and repay it down the road.

 

I suppose if you kick alot of people out of prison the cost may go down.

 

I suppose if you legalize and put a high tax on some drugs that will increase revenues.

 

As some posters have pointed out it sounds like no one wants to cut government services or paychecks in bad economic times when demand for public services increase, so....

 

 

If citizens or companies do not like it, they can always move or stop building new plants inside the state.

[Echognome]

California has the highest gross tax receipts, but is 11th per capita: http://www.taxadmin.org/fta/rate/07taxbur.html

 

By source, California's property tax is small, but is actually close to the average: http://www.taxadmin.org/fta/rate/07taxdis.html

[blackshoe]

They might also simply borrow alot more money and repay it down the road.

Sure. Just like the Feds have been doing for the last sixty years or so. Oh, wait... the Federal debt is growing, not decreasing, ain't it? :D

[mike777]

They might also simply borrow alot more money and repay it down the road.

Sure. Just like the Feds have been doing for the last sixty years or so. Oh, wait... the Federal debt is growing, not decreasing, ain't it? :rolleyes:

The fed may simply monetize, inflate.

 

 

For those of us who remember a 21% prime rate, would anyone be shocked by double digit inflation a few years down the road?

 

If calif can borrow 50 billion and pay it back with bucks worth only 25 billion in 10 ten years.....why cut services or teachers/union paychecks?

 

Even better have the fed guar. the debt....now default and walk away.

 

OTOH you can raise income/sales/car/utililty/telephone/sin/property/corp/etc/ taxes...release 30-60 thousand prisoners and legalize/tax drugs....who would not want to live in LA with not only a legal corner booze bar but a legal drug saloon.

[Elianna]

When you only need 50+% to pass a spending bill, but 66+% to pass a tax bill, something's gotta give.

Lol. And this poll about the train from SF to LA was about a proposal that didn't state anything about how it would be financed? How can one vote on such a scheme without knowing what taxes will be raised?

This is why these things should not be decided by referendum.

 

Also, supposedly much of the money would come completely from the federal government. It said in the brochure the state sent out that by passing this, CA could apply for a federal grant so that it would be paid by the feds.

[mike777]

When you only need 50+% to pass a spending bill, but 66+% to pass a tax bill, something's gotta give.

Lol. And this poll about the train from SF to LA was about a proposal that didn't state anything about how it would be financed? How can one vote on such a scheme without knowing what taxes will be raised?

This is why these things should not be decided by referendum.

 

Also, supposedly much of the money would come completely from the federal government. It said in the brochure the state sent out that by passing this, CA could apply for a federal grant so that it would be paid by the feds.

I can only ask if you live in Los angeles area do you try and get your kid into private/out of state grammer school at all costs?..Would you send your kid to public school?

 

Do you even teach in public school?

 

My only point is many say go private or move out of state, we moved, you may be able to afford private.

[cherdanno]

California has the highest gross tax receipts, but is 11th per capita: http://www.taxadmin.org/fta/rate/07taxbur.html

And 15th in taxes per income. Which is getting pretty close to average.

 

Question: Does CA have above-average income inequality? (Dot-com billionaires and movie stars...) That would make 15th per average even more close to average (in any progressive tax code, higher income inequality will lead to higher taxes per income).

[Echognome]

California has the highest gross tax receipts, but is 11th per capita: http://www.taxadmin.org/fta/rate/07taxbur.html

And 15th in taxes per income. Which is getting pretty close to average.

 

Question: Does CA have above-average income inequality? (Dot-com billionaires and movie stars...) That would make 15th per average even more close to average (in any progressive tax code, higher income inequality will lead to higher taxes per income).

I didn't mention this, because the issue is about the state government being able to provide services. Their budget should be considered not just from the tax receipts they take in, but also the number of people they have to serve. As California is in the upper quartile of taxes per capita, it seems they are not using the money wisely. Of course it's not just in their hands, but also in the voters'.

[mike777]

California has the highest gross tax receipts, but is 11th per capita: http://www.taxadmin.org/fta/rate/07taxbur.html

And 15th in taxes per income. Which is getting pretty close to average.

 

Question: Does CA have above-average income inequality? (Dot-com billionaires and movie stars...) That would make 15th per average even more close to average (in any progressive tax code, higher income inequality will lead to higher taxes per income).

keep in mind movie stars and dot.com guys move...they move often out of state......

 

example the head of microsoft and intel both live out of state of calif. .......many movie stars live out of state of calif......

 

 

1) many movie stars move out of state

2) many movie makers move out of state

3) many in areospace move out of state

4) many in "defense" move out of state

5) a few but increase in science'/computers move out of state

 

 

what did calif lead the last 3 years?

last ten years?

 

 

 

 

 

1) museum state?

2) park state?

[helene_t]

Question: Does CA have above-average income inequality? (Dot-com billionaires and movie stars...) That would make 15th per average even more close to average (in any progressive tax code, higher income inequality will lead to higher taxes per income).

I thought the US tax system (like those of most other countries) was effectively regressive since rich people have more deductions.

 

OK, it's just something I saw in the economics textbook I used 20 years ago, and maybe the overall tax system could be regressive in spite of income taxes being progressive, if poor people pay relatively more VAT and spend relatively more on alcohol and tobacco.

[hrothgar]

example the head of microsoft and intel both live out of state of calif. .......

Microsoft is headquartered in Redmond, WA (and has been since back before there was dirt).

No clue why you think the head of Microsoft would live in CA.

 

Intel, on the other hand, is based in Santa Clara. In a remarkable development, Paul Otellini lives in San Francisco. You can see his house here

http://virtualglobetrotting.com/map/43869/view/?service=1

[PassedOut]

They might also simply borrow alot more money and repay it down the road.

Sure. Just like the Feds have been doing for the last sixty years or so. Oh, wait... the Federal debt is growing, not decreasing, ain't it? :rolleyes:

California has a terrible mess on its hands, and the rest of the US should take this to heart when considering the financial position of the federal government.

 

Although Obama represents a great improvement over the leadership we've had, I completely disagree with his "tax cuts for the middle class." Politically, it's always excruciatingly difficult to restore taxes here, even when no good alternative exists. Increases in spending, though, tend to pass easily.

 

People have a proclivity to avoid making hard choices when payment can be deferred (I certainly have to guard against that tendency in myself), and the consequences always follow. Best to bite the bullet and pay as you go.

 

I recognize that deficits are necessary in hard times and that permanent improvements in infrastructure represent money better spent than money wasted on self-perpetuating subsidies, untested social programs, outmoded weapons, and unnecessary wars. Yet, I see congress eagerly embracing Obama's spending proposals while pushing aside Obama's proposals for generating the revenue to pay for them.

 

In my opinion, how Obama handles this will be a major test of his leadership abilities. I wish him well, but worry for my country.

[kenberg]

I agree entirely with PassedOut here.

 

There is, I think, a tendency to look at history and say we have always come through it. True enough, but it has been the conceit of past empires to think that their success is the natural way of things. And then... Oops.

 

I saw in the paper today that the savings rate in the US is now at 5% of income and there is worry (!) that it might rise to 7 or 8 %. Worrying that the economic recovering may be stalled because people are acting sensibly is not a happy situation.

 

I guess California has to solve its own problems, does it not? My nature is to wish the best for everyone, but it's also my nature to keep my own money for my own needs. There can be exceptions, but I don't see one here.

[Winstonm]

No one has mentioned the California pension system - this is a huge albatross around the drowning state budget.

 

As to Obama's middle-class tax cuts, this is only due to the critical nature of this recession-deflationary event. The huge amounts of money pouring in from the government is straight from the Keynesian playbook on how to stop/avoid a depression.