"There is always a philosophy for lack of courage."—Albert Camus

Wednesday, March 01, 2006

Taxing Californians Out

The great state of California has long been known as a land of opportunity—but also as the corner of the country to which all the sleaziness, greed, and stupidity of the nation eventually slide. Politically, it has been exactly that for about the past two decades.

As the Opinion Journal notes in an editorial in today's edition, California pols have done their level best to destroy the state's economy by abusing everyone who actually succeeds in fulfilling the economic promise laid down by the state in years past, in an endless stream of harassment done in the name of fairness, equality, economic justice, and other fine things. As the Journal editorial notes, the consequences of California's high and ever-increasing taxes and strangling regulatory apparatus are resulting in a turnaround of immigration patterns:

The latest Census Bureau data indicate that, in 2005, 239,416 more native-born Americans left the state than moved in. California is also on pace to lose domestic population (not counting immigrants) this year. The outmigration is such that the cost to rent a U-Haul trailer to move from Los Angeles to Boise, Idaho, is $2,090--or some eight times more than the cost of moving in the opposite direction.

What's gone wrong? A big part of the story is a tax and regulatory culture that treats the most productive businesses and workers as if they were ATMs. The cost to businesses of complying with California's rules, regulations and paperwork is more than twice as high as in other Western states.

But the worst growth killer may well be California's tax system. The business tax rate of 8.8% is the highest in the West, and its steeply "progressive" personal income tax has an effective top marginal rate of 10.3%, or second highest in the nation. CalTax, the state's taxpayer advocacy group, reports that the richest 10% of earners pay almost 75% of the entire income-tax revenue in the state, and most of these are small-business owners, i.e., the people who create jobs.

Of course, some will argue that this reversal of immigration is a good thing, as it will reduce overpopulation, etc., and reduce pressure on the state's resources. But Hongkong and Amsterdam are much more crowded than any part of California, and have almost no natural resources, yet they do just fine. No, regardless of any small good that may come of it, this demonstrates a huge and preventable failure on the part of the leadership of the state of California—and a stern warning to others.

29 comments:

Tlaloc said...

"What's gone wrong?"

Why do you assume that people leaving the state indicates something is "going wrong"?

Endless population growth is not a good thing. California has the largest population of any state in the Union at 35 million people. It has a population density of 217 people per square mile. Oregon by comparison has 36 people per square mile and it's getting kinda crowded.

You have to overcome this idea that more is always better. It simply isn't so. There are definitely points beyond which more is much much worse.

Tlaloc said...

as another stat the state of California has 12% of the total US population. It's not hard to believe that cramming that many people into 4% of the US land area is a bad idea. Spread them out a bit more.

The Classic Liberal Anonymous said...

Excessive regulations may be bad for businesses based in California, but not Nevada.

As a country are we better off if more people (or better yet, businesses) live in California?

We may very well be. California does have better (cheaper) access to global commerce/shipping (ie, ports) than Nevada and/or Boise.

Because California has a relatively large GDP, isn't it in the best interest of the USA for California to have (and keep) its strong economy?

tbmbuzz said...

You have to overcome this idea that more is always better. It simply isn't so. There are definitely points beyond which more is much much worse.


California ranks only #12 in population density among U.S. states. Admittedly, California is the most densely populated state west of the Mississippi River, but it seems to me that the proverbial "much much worse" point is still quite far away! I really don't see how the current trend of replacing the richest, most educated, most productive people with an underclass can be good for California.

James Elliott said...

California ranks only #12 in population density among U.S. states. Admittedly, California is the most densely populated state west of the Mississippi River, but it seems to me that the proverbial "much much worse" point is still quite far away!

Buzz's comment reminds me of a friend of a friend who flew out here to visit from his home in Missouri. "Did you know y'all have farms out here?" Um, duh. California has a lot of interesting demographics that play out in pretty strange ways.

Population density is a funny thing. We have huge open spaces, farmland, and utterly packed suburban and metropolitan areas. That strange juxtaposition of density and economy creates the most absurd housing market in the country. Most people leaving the state do so because they cannot afford to stay. Barring an unforeseen windfall, new public servants tend to live over two hours away from where they work, just so they can own a house. Housing prices continue to rise even as fewer and fewer homes sell.

I'm sure Tom can speak to some of this, living in LA as he does (which is even more crowded than the Bay Area). I don't pretend to have answers. All I know is that I'm entering the real workforce with my graduation in May, and I'm scared pantsless by the prospect of trying to raise a family here. After all, my soon-to-be wife makes far more money than I will, and she wants to be a stay at home mom.

tbmbuzz said...

I'm entering the real workforce with my graduation in May, and I'm scared pantsless by the prospect of trying to raise a family here. After all, my soon-to-be wife makes far more money than I will, and she wants to be a stay at home

Come to the hi tech mecca of Huntsville here in beautiful - and green - north Alabama! Low tax, low traffic, low population density, low crime, decent weather, low real estate prices, but an briskly growing region. No kidding, it's one of the best place in the U.S. to live for lots of reasons.

Tlaloc said...

"California ranks only #12 in population density among U.S. states."

True, but those other 11 states are by and large tiny states that are on the threshold of being an arcology, i.e. you could walk from one end to the other without ever stepping outside. Slight hyperbole but not by much.



"I really don't see how the current trend of replacing the richest, most educated, most productive people with an underclass can be good for California."

Oh I agree that if the issue is braindrain that can be bad for a state. But Karnick was alking about a population loss not a change in demographics within the population.

Tlaloc said...

"All I know is that I'm entering the real workforce with my graduation in May, and I'm scared pantsless by the prospect of trying to raise a family here."

Move :)

tbmbuzz said...

True, but those other 11 states are by and large tiny states that are on the threshold of being an arcology, i.e. you could walk from one end to the other without ever stepping outside. Slight hyperbole but not by much.

Maybe a little more than slight hyperbole LOL! NY, PA, OH, IL and FL are not exactly small states.

mdvoutlook.com said...

"Oh I agree that if the issue is braindrain that can be bad for a state. But Karnick was alking about a population loss not a change in demographics within the population."

That is the point of Sam's post. It's not just a simple matter of numbers. Immoral and stupid policies are not good for any state, irrespective of population. Are we saying it's a good thing to drive people from a state we perceive as overpoplated, regardless of their demographic? Personally I would love it if 15 or 20 million people left the state, because I want to move back there, but that ain't gonna happen, no matter how much the political class there screws things up.

James Elliott said...

Move :)

Believe me, Bend and Portland are high on the list of potentials. The problem is that my wife does a lot of work with children with autism, and this really is the most exciting area to live and work with regards to that population.

That and I am reliably informed that you can't get good Punjabi or Thai food outside of California.

Tom Van Dyke said...

Yes, I agree James. The food in California is way underrated. Los Angeles specifically is the new crossroads of the world.

If you want to discourage something, tax it. Hence the slowing of California's population growth. Unfortunately, California's ultra-progressive tax system serves mostly to discourage the influx of the more productive types, since the poor don't pay much more than sales tax.

(The housing bubble is the only discouragement to the common folk. Some friends of ours just had their house appreciate $500K in 3 years. They just sold it and are moving to Dallas, where they can retire and live off the proceeds.)

The tax load is even more disproportionately on the 100,000 truly rich people here in the state. (Rob Reiner is preparing another of his initiatives, this time having only those making over $400K finance universal pre-school.)

It wouldn't take much of a tipping point for California to lose the backbone of its tax base, or as I'm fond of pointing out, to kill yet another golden goose.

James Elliott said...

I think the threshold in reality is really more around what affects one's style of living. My father, for example, who pays the mental health tax and will pay the universal pre-school tax, states that he gladly does so because it benefits society and therefore, indirectly, himself. He can do so without those taxes impacting his style of living, as can most of those who pay them.

That said, there is a legitimate critique of liberal policy enaction that might best be described as "throwing money at the problem." As I become more involved in the policy and research (particularly around early childhood education), more and more of my work (I predict) will become geared towards revenue-neutral policy change that improves service delivery. Liberals need to do more in that vein. Now, budgeting priorities are another matter entirely, but a bit more esoteric and far-ranging a discussion.

One little thought to chew on, however: Why is something like the proposed univeral pre-school tax viewed as a zero-sum game? Why not view it as an investment for future tax reduction? Children who go to preschool are more likely to be better educated, not be on welfare, not go to jail, and have higher-paying jobs. An investment in preschool may improve the state's tax base twenty-five years down the line and reduces tax expenditures.

Matt Huisman said...

Sorry to be so off topic here, but all this food talk requires me to ask the following:

I'm going to be in San Diego (Escondido, actually) in a couple of weeks. What restaurant do I need to go to while I'm there? [Note: I'll have a 6 & 4 yr old with me.]

Any help would be appreciated. [I apologize if this gliks up the post flow.]

Tlaloc said...

"Believe me, Bend and Portland are high on the list of potentials."

If you need any help or advice moving up here let me know.


"The problem is that my wife does a lot of work with children with autism, and this really is the most exciting area to live and work with regards to that population."

depending on what she's doing something like this may fit:
http://www.hearingandspeech.biz/children/autismparsupp.asp

There are also a number of hospitals up here. Of course if she's hoping to become a stay at home mom it may not be terribly important if the area has job opportunities for her.



"That and I am reliably informed that you can't get good Punjabi or Thai food outside of California."

You must be joking. We have entirely way too many Thai restaraunts up here (I hate thai food, anything that includes curry milk is not food, it is a punishment). Not sure about the Punjabi.

Now Bend on the other hand isn't exactly a metropolis. You move there and you better get used to Dominos death disc.

Matt Huisman said...

An investment in preschool may improve the state's tax base twenty-five years down the line and reduces tax expenditures.

I wonder if we could set up some sort of financial instrument where my extra-investment in pre-school now could be returned to me in an annuity that would begin 25 years from now. All those reduced tax expenditures could be used to fund my annuity, right? Count me in.

Tlaloc said...

"Maybe a little more than slight hyperbole LOL! NY, PA, OH, IL and FL are not exactly small states."

I'll grant you four of those but NY actually fits my scenario better since half of it's population is crammed into NYC (which is for all intents and purposes an arcology). That still gives me 7 out of 11 states.

Tom Van Dyke said...

James, I'm not really approaching it that way, whether it's moral or even effective to launch universal pre-school. I'm just saying that it won't take much to collapse California's tax base, since it rides on so few backs.

But neither should it be taken as a given that the wisdom of more pre-skool spending is a slam dunk. However, the concept makes one so warm & fuzzy that I doubt it will get much of a critical eye. All nice-sounding goods should be enacted, and levees raised.

That's how we do things in California. If we kill the golden goose, there are plenty more where he came from.

(Mr. Huisman, almost any ethnic family-style restaurant will be cheap and great. The only way you can get a bad meal here is to go semi-upscale bourgeois.

Try Oaxacan. The fried grasshoppers are excellent, and double as exotic playthings for the kids.)

Tlaloc said...

"But neither should it be taken as a given that the wisdom of more pre-skool spending is a slam dunk. However, the concept makes one so warm & fuzzy that I doubt it will get much of a critical eye. All nice-sounding goods should be enacted, and levees raised."

As a side point that may highlight why Preschool spending is needed consider the following:
Schools now recommend waiting until age 6 to enroll kids in kindergarden and the kindergarden curriculum is now what used to be the first grade curriculum
which means...

that kindergarden is now first grade for all intents and purposes and hence preschool is wanted to fill the roll that kindergarden used to.

connie deady said...

Anything that reverses the population flow into California is good as far as I'm concerned.

SoCal doesn't have the water to support its population.

Matt Huisman said...

Schools now recommend waiting until age 6 to enroll kids in kindergarden and the kindergarden curriculum is now what used to be the first grade curriculum...

Let's see, recommend that students wait a year before starting and skip the material that would have been covered - only follow that up by saying that kids should start earlier and cover the material that was skipped.

???

(The sad thing is that I believe you are essentially correct.)

Maybe I'm missing something here, but I don't think they cover that much ground in preschool. Are we really saying that we can't make that up over the next 12 years? Seriously, the best way to 'catch up' is by working with immature kids?

Tlaloc said...

"Maybe I'm missing something here, but I don't think they cover that much ground in preschool. Are we really saying that we can't make that up over the next 12 years? Seriously, the best way to 'catch up' is by working with immature kids?"

But you aren't working with immature kids.

Look kindergarten used to take 5 year olds, right? Now they want 6 year olds. So that means the five years olds end up in pre-school.

But at the same time the kindergarten curriculum has changed to cover what used to be done by 6 year olds in first grade.

look at it like this

this is how it used to be
name curricula age
1st 1st 6
kind kind 5
pre- pre- 4

now it's like this
name curricula age
1st 2ndish 7
kind 1st 6
pre- kind 5

all that's changed is we've scooted the names around, the actual age of the kids and what they do stays basically the same. But that means if you don't have preschool what you really are doing is keeping kids out of what was kindergarten.

Matt Huisman said...

I get what you are saying, I just don’t see how it (what schools appear to be saying) makes sense. In the old model, we had 6 yr olds doing 1st grade work. In the new model, we have 6 yr olds doing 1st grade work. The only thing that has changed is the grade name. The problem is that by the time you get to grade 12, the new model looks like this:

name curricula age
12th 12th* 18

* If we're lucky.

In other words, the new plan is taking 14 yrs (Pre - 12) to do what used to be done in 13.

Kindergarten is too tough for a 5 yr old, so wait. But Pre-K is important and your 5 yr old should attend because its what they used to call Kindergarten. That's just crazy.

James Elliott said...

"But neither should it be taken as a given that the wisdom of more pre-skool spending is a slam dunk. However, the concept makes one so warm & fuzzy that I doubt it will get much of a critical eye."

There are two issues here, really:

1) The private pre-school model is unfeasible. There are too few providers and costs continue to increase. It is not unusual (in California) for parents to camp out overnight in parking lots during preschool registration time in order to get their child enrolled. Costs are rising astronomically, so much so that poor and low-income families simply cannot afford preschool.

2) Early childhood education is unfortunately adopting a far more academically-based system. The focus in kindergarten (KINDERGARTEN!) is on reading comprehension and math skills. I've seen ten year olds learning math I still can't do in graduate school. We've moved away from a healthier model of child development and are focusing on academic skill-based learning. I guarantee there's going to be a whole new crop of social and sensory problems for years to come.

I fully agree with the article Tom linked to when it calls for a means-test for preschool subsidies. If the kids' parents can afford preschool, screw 'em. They'll get it anyways. Give that money to the kids' whose parents can't! I'm not a fan of the Reiner-proposal for many of the reasons Reason (ack!) states: it's fiscally unsound and ineffective. Reason's op-ed, which Tom linked to, commits a further error in inappropriately conflating two unrelated statistics (preschool enrollment and "school achievement") and attempting to establish a causal relationship that is otherwise not apparent (there are far too many confounding variables).

However, a focus on test scores as the measure for preschool's effectiveness is just plain stupid. It falls into the foolish "academics first!" notion that now pervades popular American paradigms on education. The most effective models are far more holistic and embrace non-traditional academic standards (such as participatory models at some charter and magnet schools or the public service model taught in Providence, Rhode Island).

A child's intelligence and academic success hinges on two factors, when controlled for everything else: mother's age at child's birth (over thirty is best) and mother's educational level.

Tom Van Dyke said...

In other words, we should throw billions into a program that may or may not help, and we have no way of knowing.

But it feels good, so let's do it.

James Elliott said...

In other words, we should throw billions into a program that may or may not help, and we have no way of knowing.

But it feels good, so let's do it.


Did you not read the whole "liberals have a problem with throwing dollars at things" or do you just enjoy glossing over parts that dull your oh-so-clever comments? What part of my comments said "let's vote for the Reiner thing and throw money at the problem because it makes us feel fuzzy?" I'm fairly certain they took the position that the Reiner proposal sucks. Oh, look! They did.

Tom Van Dyke said...

James, I wasn't referring specifically to the Reiner initiative. I read you. But altho you reject it specifically, you're still with it in spirit. I question its spirit as well.

Now, I'll look at anything that shows a causal relationship between doing x on one end and showing y on the other.

All I hear from the education establishment is that teaching kids anything of substance is inimical to their growth as human beings.

Academics? [shudder] "Teaching to the test?" Well, life's a test. Either 2 + 2 = 4 or it don't. You either know what "fatuous" means, or you know how to look it up. ;-)

But I'm not tough. Show me pre-K helps keep a kid out of jail, and my wallet opens.

Is it or is it not true that by the time a kid's in 6th grade, there is absolutely no way to tell whether he went through Head Start unless you ask him?

James Elliott said...

All I hear from the education establishment is that teaching kids anything of substance is inimical to their growth as human beings.

I'd say that's rather an exaggeration. I'd think that what they're really saying is that traditional pedagogic techniques are not as effective in today's society, and in particular do not contribute to well-rounded development.

It is indeed true that the academic benefits of preschool fade. However, academics is only a small portion of what makes preschool (and I'll use Head Start as the example here) important. For example, it helps young students to keep up with peers who come from single earner, dual-parent homes in the early grades, preventing them from falling further behind in the later grades.

Preschool is shown to help with sensory, social, and emotional skills. Basically, they're learning the valuable skills of working and playing well with others. "Use your words," things like that. Kids who participated in Head Start were less likely to go to jail, more likely to graduate high school, and more likely to go to post-secondary education. The academic benefits of preschool are really not the point. School in general teaches a lot of lessons that are far more socially and developmentally important than mere academics.

Early childhood intervention and education is what I do for now. With a lot of luck, I'll land a position in a few months that'll have me implementing San Francisco's universal pre-school initiative, and I'll be able to speak more authoritavely. (I think the odds of my landing the job are slim though.) I think preschool and early intervention are hugely important. Properly implemented, they will save potentially billions of dollars from state education, justice, developmental, and social services agencies.

Sorry I was so snappy yesterday, BTW.

Tom Van Dyke said...

Kids who participated in Head Start were less likely to go to jail, more likely to graduate high school, and more likely to go to post-secondary education... I think preschool and early intervention are hugely important. Properly implemented, they will save potentially billions of dollars from state education, justice, developmental, and social services agencies.

Well, I should hope so, since many billions will be sunk into them.

If what you write about Head Start is true, then I'll drop my reservations. I haven't run across anything that substantiates what you say, but I promise to keep an eye out for it.

By your account, Pre-K is self-evidently the greatest thing in the history of education. Surely we should enhance it.