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Re: Pigs at the trough - 97fan - 11-10-2010

Washingtonismoney makes several great points. I agree with everything he wrote.

Pastor: I would not argue that one state was influenced by the recession and another was not. But would you dispute that the recession has hit some states harder than others? Nationwide, housing and related services comprise around 15 percent of GDP. Foreclosures in California are happening at around four times the rate that they are happening in Texas. I think it\'s easy to see how this kind of disparity in the impact of the housing bust could result in a large part of the 4.3 percentage point difference in the two states\' unemployment rates.

Also, are you saying that someone has done an analysis of the effects of the Oregon tax increase on the state\'s revenue situation that controls for the effects of the recession? If so, please provide the link.

I will take a look at the Boston College study that you refer to.

Re: Pigs at the trough - gbiddulph - 11-10-2010

97fan and Washingtonismoney, would you please take a look at the California budget and tell me how you\'re going to balance it without making large cuts in services?

Your answer, like the answer of most people in California these days, is to make "the rich" pay more.  All empirical data show that the truly rich do not pay more.  The ones who pay more are the people making $100k to $250k per year.  These are the people who, given all of the places where you can live (like Colorado) at half the cost, you decide to move to.  In many cases, people follow their employers, who also decide to move because the Dem legislature has just decided to impose a long list of new regulations on your business.

Some really bad times are coming for California (and I say this as somebody who grew up there and went to Stanford and still loves the place).  You have been warned.

When will it start affecting public universities and their football programs?  I am hoping the current trend of kal and UCLA being doormats continues.   :)

Re: Pigs at the trough - 97fan - 11-10-2010

Fan In Colorado:

In terms of California\'s budget, I\'m not an expert by any means, but I suspect that what\'s needed to balance it is a mix of spending cuts and tax increases. Unfortunately, the Republican Party -- at least at the national level -- refuses to entertain tax increases under any circumstances. Making things even more difficult for California are Prop. 13 and other measures that make it difficult to maintain existing revenue streams. I no longer live in California, so I will defer to others here, but I believe the state\'s revenue base is extremely pro-cyclical, meaning that tax revenues skyrocket in good economic times and plummet in bad times. This is a problem without a good solution, given the constraints that the state\'s voters have placed on the state legislature.

I don\'t know what the best mix of budget cuts and tax increases is in California, but I generally think that funding for education at all levels is vitally important. A good education system is a prerequisite for long-term economic growth, and California\'s public universities (along with Stanford, of course) have provided the r&d backbone for the state\'s dynamic economy for decades. I also think that prisons are a great place to look for savings -- UCLA criminologist Mark Kleiman has some great ideas in this regard. I\'m sure there will have to be cuts in other areas as well, and that public-employee unions will have to absorb some of the costs.

In terms of tax increases, I do think the rich should pay more of the cost than the middle class and the poor. I agree with you that there are lots of loopholes that rich people use to reduce what they pay in taxes. But data at the federal level actually show that the rich nonetheless pay a lot of money in taxes. The top one percent of earners - who had an adjusted gross income of $380,000 - paid 38 percent of the income taxes collected by the federal government in 2008. If you don\'t believe me, follow this link:
http://www.taxfoundation.org/news/show/250.html

Re: Pigs at the trough - gbiddulph - 11-10-2010

An interesting thought experiment would be for people to consider what exactly a public good is (Econ 101 with Prof. Boskins in 1981).

My definition of a public good is something that we should all agree the state should do.  An additional caveat is that it is something that would not be done without the state doing it.

Police, the military and the courts are definitely a public good.  I hope we can all agree these are appropriate activities of the government.   You probably could add the prisons, although there is definitely room for privatization there.  Is education *always* a public good?  No, it is not.  Education would take place without government involvement.  People would send their kids to private schools.  If all kids went to private schools, the cost of private schools would go way down.

Another thing to think about:  why should my libertarian buddy Garvin who has no kids have to pay for educating my five kids (which he actually does today because two of them go to schools that his property taxes help finance)?

I am not saying we need to get rid of all public education tomorrow.  I am saying that we are seeing the results of an out of control government, and the situation is getting very alarming indeed.  The Fed is in the middle of Quantitative Easing 2, which means the Fed, at this very moment, has implemented a policy that is, in effect, monetizing our debt.  This is already driving down the dollar and causing a lot of problems with our trading partners (who cannot sell as much to us because their currencies are overvalued).  We have the president-elect of Brazil, a former Marxist, lecturing us on our debt problem.

The debt problem will filter its way down to state government, and it will mean people need to take a close look at what is essential for govt to finance and what is not.  The days of government financing everything are over, at least for the foreseeable future.

Sorry to be such a gloom and doom guy, but I don\'t know much about Stanford football, but I do know something about this subject, so I thought I\'d weigh in.  I will shut up now.

Errrr, Go Stanford!!!!

Re: Pigs at the trough - fullmetal - 11-10-2010

If I remember correctly, one of the big differences between California and Texas (which is actually looking at a budget shortfall in the near future) is the means by which each state collects revenue.

California seems to take a large portion of its revenue from income-derived taxes (state income tax), while Texas counters this with zero state income tax and fairly substantial property taxes.  (I think this is still the case.)

Naturally, as economic cycles ebb and rise, California\'s revenue base will correlate pretty closely, subjecting it to some amount of risk.  Property taxes in Texas, however, tend to be a very stable source of revenue. The merits of either may be debated, though Texas seems to be doing slightly better at the moment.

Re: Pigs at the trough - Viking_Guy - 11-10-2010

Glenn--

Prop 13 has two major components:

(1) restrictions on property tax increases: the assessed value of a property can only increase by a maximum of 2% per year, and the property can only be reassessed on transfer of ownership and/or major construction (which has led to a lot of issues about what constitutes major construction).  It also rolled assessed values back from their current level (1978 at time of passage) to 1975.

(2) Enshrining the 2/3 majority rule for any increase in pretty much every state-level tax, as well as municipal special taxes.

One of the things about Prop 13 that is not well understood is that it applies to commercial properties as well, and of course there has been all sorts of legal maneuvering to prevent an official "change of ownership" for commercial properties (for example, large real-estate owners often set up a shell company to own a large property, then sell the company rather than the property.  Ownership therefore never officially changes, as the property is still owned by the shell company).  

VG


Re: Pigs at the trough - 97fan - 11-10-2010

Garvin, some of your basic facts are just wrong. Republicans controlled the U.S. House of Representatives from 1995 to 2007. They controlled the U.S. Senate from 2003 to 2007. And George W. Bush was president from 2001-2009. Have you been living in an alternative universe in which Al Gore won the Florida recount? You had a front-row seat for that circus.

Some more facts: California has had a Republican governor since 2003. And while the Democrats have long controlled the Legislature, tax increases require a two-thirds vote, which has given the GOP effective veto power over tax increases.

More esoterically, Prop. 13 doesn\'t just affect properties that haven\'t been sold since the late \'70s, although the owners of those properties are its biggest beneficiaries. When a property is sold, a new assessed value is established, but that assessed value can only rise by a maximum of 2 percent each year. So if you bought a California home in the early \'90s, when home prices slumped, and held onto it through the property boom of the last decade, you saved a lot as a result of Prop. 13.

If you go back and re-read my last post, you\'ll see that I do think the government needs to cut spending. I also that federal income taxes should go back up to their levels in the 1990s -- America\'s disastrous socialist experiment. 8-)

Re: Pigs at the trough - Viking_Guy - 11-10-2010

As a small follow-on-

It has long been rumored that one of the subtexts of California\'s last state-level redistricting (post-2000 Census) was to not only gerrymander to support incumbency for each party, but also to do so in order to guarantee the California GOP more than 1/3rd of the seats in the legislature.

VG


Re: Pigs at the trough - 97fan - 11-10-2010

Pastor:

I believe I found the Boston College study you were referring to. A few points:

- The 2004 tax increase in New Jersey was a 2.6 percent tax hike for people earning $500K or more per year.
- The $70 billion in wealth leaving New Jersey from 2004-2008 refers to all residents who left the state, not just high earners who were subject to the tax increase.
- The $70 billion figure refers to total wealth, not income. Income seems like a more relevant metric, since we\'re talking about an income tax.
- The Boston College study makes no mention of the tax hike and certainly does not claim that $70 billion in wealth left New Jersey as a result of the tax hike. Correlation is not causation.

A bit of Googling also led me to a Princeton study that does look at the impact of the 2004 tax hike in New Jersey.

It states that:
- The number of people earning $500K or more in New Jersey rose from 26,000 in 2002 to 42,000 in 2006.
- Roughly 350 households earning $500K or more either moved out of New Jersey or did not move into New Jersey as a result of the tax hike, resulting in a loss to the state, strictly from these 350 households, of about $38 million per year.
- Despite the $38 million in lost revenue, the tax increase generated a total of about $895 million per year in new revenue.


Re: Pigs at the trough - gbiddulph - 11-11-2010

I know I said I was going to shut up, but I just can\'t help myself.

97fan and washingtonismoney, here is my prediction:

Jerry Brown will make a lot of noise about being a fiscal conservative, but at the end of the day he will sign bills that substantially raise taxes in California.   Meanwhile, Perry in TX will not substantially raise taxes in Texas.  Both states have deficits that are in the same range, more than $20 billion.

I predict that in four years Perry\'s plan -- not raising taxes -- will cause Texas to continue to boom.  I predict that Brown\'s plan -- raising taxes -- will cause California to continue to stagnate.  California\'s unemployment will continue to be at least three -- and probably four points -- above Texas.  I predict net state out-migration -- which as been 1 million-plus people in the last decade for California -- will continue.  I also predict that state GDP will grow more in Texas than in California.

Care to make a gentleman\'s bet on this issue (given this is a sports site)?

Before you do, you may want to read a document call "Rich States, Poor States."  You can google it and download the PDF.  Very interesting reading.

Bets are off if Jerry Brown pulls a "Nixon goes to China" and actually vetoes tax increases.  If he does that, California will rescue itself.  But that will also mean brobdingnagian cuts in public education, which will mean more suffering for Kal, UCLA, etc.



Re: Pigs at the trough - pefloresjr - 11-11-2010

Wow.  This discussion is all over the place.  It\'s tough to know where to begin.  In full disclosure, I point out that I am the president of the California State Attorney\'s Union representing over 3400 attorneys, hearing officers, and administrative law judges.  

To those of you who think California will soon be raising taxes like a drunken bridge troll, you are wrong.  (I\'ll bet you the beer of your choice FaninCo.)  Raising taxes requires a 2/3 vote and the republican\'s hold more than a third of the seats.  They have shown no interest in even modest tax increases to soften the blow of the harsh cuts that have happened and will continue to happen.  (I\'ve met with Brown, and both Rep. and Dem. leaders in CA and all agree that there will not be a lot of tax increases happening.)  Brown says he will only do it with a 2/3 vote by the people in an initiative.  

I agree that the UC (and Cal State) systems have been overly generous and inefficient in their spending because they have not bee held accountable and have usually been bailed out by the Cal. economy and taxpayers.  That is clearly changing and the future holds more cuts for them.  When it comes to priorities, I would place the educational mission above the athletic mission every time.  

But, I think it is kind of silly to think that the market could handle education better than the state.  If that were true, it would have happened.  But the market based schools do have the benefit of not being required to educate all of our students, even the ones most at risk of becomming residents of our prison system.  The state can\'t simply deny admission to those with problems or those who can\'t pay.  The market doesn\'t give a damn about the social costs we all pay if we do not properly fund education at all levels.  

In California, the taxpayers don\'t exist to serve the government.  In fact, California has one of the lowest numbers of government employees per capita in the country.  Some government pensions got too sweet and were abused (particularly in the sacred cows of law enforcement and fire fighters).   That has created the idea that the pensions are bankrupting the state.  However, the depression and market drops are what have created the perceived problem.  I say perceived because most of the doomsday predictions about pension costs assume that the market will remain in its current state.  Based on the long-term history of the market, that is an absurd assumption.  In fact, last year, the state pension fund earned a 12% return on its investments.  I\'ll take that return any time.  State workers will have to contribute more to fully fund the pensions and health care, but until recently, because of the market boom periods, the State of California went several years without paying anything to match the employee contributions.  Actual pension reform is needed to allow the state to put money away when the market is good to pay for the pensions when the market is bad.  That would even out the state\'s contributions every year, just like the employee\'s contributions.

Also regulations are a complex double edged sword.  Too many do get in the way of business, but less is not always better.  For instance, sensible environmental regulation is good for the citizens and good for business.  But under the less if better model, the state (OR COUNTRIES) that have no regulations will get the most business from other states and should be applauded.  That makes no sense to me.  This country has attracted the world\'s money and investment for the very reason that government regulation and stability makes it a secure, predictable place to invest.  Getting rid of rational regulation is what led to the rampant speculation in unsound investments and the collapse we are suffering under now.  The idea that less regulation will fix that is absurd.  Of course, too much of anything will start to eat away at the positive outcomes.  

If people are really intersted in smaller government, we have to reduce military and healthcare (medicaid) costs.  Those are the big dogs where the true money is spent.  In this state, prison spending, healthcare costs and uneven pension funding need to be dealt with.  

We could also have waiver states, cities or even citizens and let those who don\'t want to pay, opt out and use their money and the free market to take care of themselves.  And I mean that you let them die if they don\'t want to pay any damn taxes for police, fire, ambulance or health care.  Me, I\'ll pay my taxes and keep working to make the government efficient and fair.  

Cheers,
Pete F.  

ps. I have written this on a break from working during the holiday in my state office, which is about 20% full with state prosecutors who are paid only two thirds of tha money that other government (not private sector) attorneys make.  

Re: Pigs at the trough - fullmetal - 11-11-2010

Market-based schools...like the University of Phoenix with its kal-grad CEO deprecating the idea of a school that inculcates values into its students--yeah, that sounds like a bad way to educate people :(

Re: Pigs at the trough - 97fan - 11-12-2010

Fan in Colorado:

I\'m not sure how you want to structure a wager, but I am open to it. How about this? If in November 2014, Texas\' unemployment rate is at least three points lower than California\'s, you win. If not, I win. Is it a deal?

(I\'m not making any predictions about future tax rates in the two states. I just think that California\'s extremely high unemployment today is largely a result of the aftermath of the housing bubble, not tax policies, and that the effects of the housing bubble will have worn off by 2014.)

Re: Pigs at the trough - gbiddulph - 11-12-2010

97fan, it\'s a bet.  Let\'s revisit in the fall of 2014.  (I\'ve been reading this board since it started, so it\'s a good bet I\'ll still be lurking here in 2014.)

You really should take a look at "Rich States, Poor States."  Very interesting.

You also may be interested to hear that Art Laffer just called Jerry Brown the best governor in California history during the 1970s because of his implementation of Prop. 13 and his general stand in favor of tax simplification.  Could Jerry Brown stand firm against tax increases in California now?  We shall see.

Re: Pigs at the trough - 97fan - 11-12-2010

I should still be lurking here in 2014, too -- unless Jim Harbaugh bolts for the NFL, our next coach is a bust, the discussion here turns to whether or not 15,000 is a decent attendance number for the USC game, and acute depression sets in. But if that happens, losing a bet will be the least of my worries.