Sunday, January 13, 2013

The Land of Perfect Weather

I knew where I was flying to of course.  But, even if I hadn’t, I got my first clue when I stopped to buy a bottle of water in the airline concourse.  Ten percent sales tax!  I must be in California, the land of perfect weather…  and high taxes.

I have written about the "has-been" state before.  A study by the Federal Reserve Bank of San Francisco revealed that California’s non-farm employment growth has lagged that of low tax, low cost states like Texas substantially.  The bank’s president said, “Economies of states ranked high on tax-and-cost indexes [meaning lower taxes and costs]…  tended to grow faster than the states ranked lower”.

California is not alone as a high cost state.  On my recent visit to the Finger Lakes region of NY, I watched CNBC diva Maria Bartiroma emcee the presentation of over $700M in state government grants to developers throughout the state.  Presumably, these are projects that did not offer sufficient return to attract private capital.  The Finger Lakes (western NY) garnered the largest share, $96M, which was cheered by local business leaders – you know, those free market Republicans who don’t like government interference.  Those I spoke with pointed out that the region got none of last year’s freebies.  As for the free market?  “Well, they’re going to give it away anyhow.  At least we got our share,” said one.

New York has the highest amount of public debt per capita in the country, over $13,000 for every man, woman and child who lives in the state.  It’s a shame that no one thought of the option of keeping $700M in the state treasury and either lowering taxes or paying off some debt.

Meanwhile, Californians are headed for the exits.  Despite high tax rates, state revenues are falling and Spectrum Location Solutions, a company that tracks corporate relocations, has documented over 250 corporate departures last year.   In addition, they have cited a loss of more than 15% of financial services jobs in both Los Angeles and San Francisco that have been transferred to other states.  In fact, all of our high cost, high tax traditional financial centers – New York and Chicago in addition to the two California cities – are losing such jobs according to a report by Moody Analytics.

Meanwhile, states like bordering Arizona are targeting California companies to convince them to relocate to their low-cost, low-tax state.  But, they may be late to the party.  The US Census Bureau reported that California’s coastal cities – San Francisco, Los Angeles and San Diego – have lost over 2.3M people people since the turn of the century.   The Orange County Register cited high cost of living, high taxes and onerous business regulation as the key drivers of the trend.  To make matters worse, the state has passed a new land use law (SB375) that will force people to live in densely populated areas to reduce sprawl and pollution.  The law requires housing density of at least 20 units per acre and easy access to mass transit.

The tyranny of a one party government – no matter the party or which government – generally leads to folly.  In the case of California, the folly is Blue State utopia.

Well, at least the weather is great.


  1. Zachary J. Sochacki • "I knew where I was flying to of course. But, even if I hadn't, I got my first clue when I stopped to buy a bottle of water in the airline concourse. Ten percent sales tax! I must be in California, the land of perfect weather... and high taxes."

    Or at O'Hare in Chicago! We're just as bad and even more in debt. 5% Illinois sales tax and sure to go up soon simply because the State has pension obligations up the kazoo. Cook county sales tax not far behind what you've mentioned. The highest parking rate in the country because Mayor Daley sold the rights to manage all on-street parking meters to a third party investment group who keep bumping rates annually. It's a joke.

    We're an accident that's continually happening.

  2. John W. Stevens, Jr. • John -- Great article. I was never a "Fiscal Hawk," but I am a fiscal conservative and live in a relatively speaking fiscally conservative state with no personal income tax. I have had numerous job offers for positions in California but I never could bring myself to live in that state because of their taxes, property costs, and government interference in almost every aspect of life; Although, I do like some of the more libertarian positions taken in some areas.

    I always have advocated far less interference by the Federal Government in every aspect of our lives and business. I see no justification for corporate welfare, big farm welfare, or many of the other programs where the Government picks winners and losers. All such programs should be ended. The Government should do only that which only the Government can do, and in strict accordance with the US Constitution.

    Were I in the shoes of those businessmen in the Finger Lakes area of New York, I suspect that if I am honest with myself, I would be hard pressed to turn down such grants from a state that routinely takes so much of what I earn, as an individual and as a corporation. As a libertarian-conservative, I try very hard to live in accordance with my deeply help principles and conviction; But is not always easy

  3. Robert Stone • Even the weather is not so great this week in CA!

  4. Bill Eaton • Here's my 2 cents! California will be totally bankrupt inside 10 years - courtesy of a Democratic super majority in the state assembly

  5. Jeffery Pyle • John, if it's possible to tax, spend and regulate a state into prosperity, California will show us how.

    However, I think California will always have an allure because of the climate and abundant natural beauty. There's a truism about California -- people who live there can't imagine living anywhere else and people who don't can't imagine living there.

  6. Jason G. Ramage • Part of the problem with CA is the limitations the voters put on the raising of property taxes, while still expecting spending on services to increase with demand.

    I would love to live in CA and actually would have moved there had I been offered the position I applied for at UC-Davis. But the tax burden that comes with living in the golden state is a major deterrent. I would only move there at a certain salary level, but that is a level that I may not be able to attain with my current experience.

    I found it pretty disturbing that the highest state income tax rate (9% or so?) kicks in at a salary in the upper $40s, which means you don't have to be very rich to get punished.

  7. Eyda Hizer • Bill - I guess you haven't heard that the Democratic super majority plus a democratic govenor ended the budget deficit in California

  8. Bill Eaton • I heard ( and saw), but it will only take a couple of years before they are back to the big deficit spending

  9. The larger issue is that high taxes are undermining the revenue base by driving employers out of the state.

  10. Eyda Hizer • To me, the point is that the blog you quoted is flawed. The blog states that California has the largest debt per capita in the country. The following states differently:

    And here is more data about the taxes per capita:

    If one make over $1 million, California is pretty pricy. Not so much for incomes under $1 million.

  11. @eyda. Sorry, but he blog mentions New York as having the highest debt per capita.

    In any event, I suggest we not get hung up in the factoids. The overriding issue is employers leaving the state.