2010 November 07 Sunday
Higher Taxes And More Flight From California?

The passage of California Proposition 25 makes it easier for the state legislature to pass budgets.

California voters approved a ballot measure to lower the threshold for the state Legislature to pass a budget and revoking lawmakers’ pay when a budget is late. Voters also said yes to making it harder to raise fees.

The expectation is that this will make tax increases easier to pass. So state employee unions supported it and business interests opposed it.

Opponents, led by Chevron Corp., as well as beer and wine distributors and the California Chamber of Commerce, plowed $15.8 million into defeating it. They said lowering the threshold to pass budgets could make it easier for lawmakers to raise taxes because of ambiguous language in that part of the measure. They also said budgets could raise fees, such as for vehicle registration, when passed by a simple majority.

The state is highly vulnerable to a flight of higher income earners. 1% of California tax filers pay almost half the state's income tax revenue.

Already I've heard grumbling from folks who are making plans to pull up stakes because they feel squeezed by California's high taxes and declining standard of living. Sure, it's probably just talk. But California can't afford to lose a single one of the 140,000 households that earned more than $480,000 in 2008, and represent 1 percent of tax filers, yet pay almost half of the state's income taxes.

Think about it. In a population of about 38 million if the 140,000 top earning households move to other states then the state of California would go bankrupt.

In a summer 2010 City Journal article Joel Kotkin surveyed the various ways California has declined in recent years. Natives are leaving the state.

California’s supposedly progressive economics have had profound demographic consequences. After serving as a beacon for millions of Americans, California now ranks second to New York—and just ahead of New Jersey—in the number of moving vans leaving the state. Between 2004 and 2007, 500,000 more Americans left California than arrived; in 2008, the net outflow reached 135,000, much of it to the very “dust bowl” states, like Oklahoma and Texas, from which many Californians trace their origins. California now has a lower percentage of people who moved there within the last year than any state except Michigan. Even immigration from abroad seems to be waning: a recent University of Southern California study shows the percentage of Californians who are foreign-born declining for the first time in half a century. For the first time in its history as a state, as political analyst Michael Barone has noted, California is not on track to gain a new congressional district after the 2010 census.

This demographic pattern only reinforces the hegemony of environmentalists and public employees. In the past, both political parties had to answer to middle- and lower-middle-class voters sensitive to taxes and dependent on economic growth. But these days, with much of the middle class leaving, power is won largely by mobilizing activists and public employees. There is little countervailing pressure from local entrepreneurs and businesses, which tend to be poorly organized and whose employee base consists heavily of noncitizens. And the legislature’s growing Latino caucus doesn’t resist regulations that stifle jobs—perhaps because of the proliferation of the California equivalent of “rotten boroughs”: Latino districts with few voters where politicians can rely on public employees and activists to dominate elections.

Joel dreams of a Latino-Anglo coalition. It says something about how much California's intellectuals have adopted Mexican and Central American viewpoints that they refer to white people as Anglos. How many white people do you know who call themselves Anglos? Seriously. I do not know anyone who does.

A coalition of inland Latinos and Anglos, along with independent suburban middle-class voters in the coastal areas, could begin a shift in policy, reining in both public-sector costs and harsh climate-change legislation

The flight of industries from California is not just due to regulations and taxes. Demographic changes due to immigration have replaced whites with groups that have low educational attainment, fewer useful skills in work environments, and lower incomes. If the people of California are unable to produce wealth like previous generations could then no changes in state public policy can compensate for this.

Kotkin writes a lot of useful articles about bad government policies and economic and social changes. But he writes using the allowed assumptions of the ruling politically correct intellectual elite. Therefore he can't actually approach root causes or effective solutions of the biggest problems facing the state and the nation.

Share |      By Randall Parker at 2010 November 07 09:49 AM  Economics California


Comments
kurt9 said at November 7, 2010 10:05 AM:

Kotkin writes a lot of useful articles about bad government policies and economic and social changes. But he writes using the allowed assumptions of the ruling politically correct intellectual elite. Therefore he can't actually approach root causes or effective solutions of the biggest problems facing the state and the nation.

Quite correct.

I would characterize Kotkin as a pro-growth moderate liberal. His book "The Next 100 Million" is actually quite good, considering the cognitive straight-jacket that he thinks out of.

Fake but Accurate said at November 7, 2010 10:13 AM:

Unproductive people and people with a limited future time orientation usually think that things will remain much the same into the foreseeable future.

"The Next 100 Million" might actually take longer than they think to arrive, and given that the skills of those from south of the border and from Africa are not that good, might cause more problems than expected.

A.Prole said at November 7, 2010 11:09 AM:

Mass 3rd world immigration fucked up California good and proper.
All it did was to make the rich richer and the poor poorer - a truly horrible income distribution reminiscent of shit-holes like Brazil, the type of place in which the teeming millions of poor slit each others' throats for a few dollars whilst the gilded rich in their gated communities spend more on pampering their dogs than the poor ever see, even after they've slaughtered each other for a few bucks.
But it didn't have to be that way, prior to the immigrant deluge of the 1970s, California WAS the brave new world, the society that was at the cutting edge of modernity and social progression - the the sci-fi utopia rather than the dystopia of Bladerunner.
California is a warning to all advanced nations of what 'open borders' actually results in #the policy pushed sooo hard by the WSJ, The Economist, the neo cons, George Bush, The Republican Party, the Democrat Party, big business, organized labor, the left, the right, the churches, the Jewish lobby, the muslim lobby, the Hidu lobby ie virtually everyone#.
If your nation follows this path it will certainly end up like California.
The post should really be titled "How to fuck-up Paradise in one easy lesson and in 50 years".

Minos said at November 7, 2010 12:52 PM:

I think they use the term "Anglo" cause "white" doesn't sound PC enough. I'm about the most Anglo person I know [I'm in CA], and I'm only about 20% actual Anglo.

Black Death said at November 7, 2010 1:50 PM:

California's chances for a bail-out from Washington just went up in smoke in the last election. No way a Republican House is going to approve federal dollars for the end-of-the-road liberal sinkhole California has become.

gymquiz said at November 7, 2010 7:22 PM:

I'm from Texas, and we've used the word "Anglo" all my life. I like the term. We've been using it commonly for about 65 years as far as I can tell. It's from the word Anglo that people in the Nixon era created the term Hispanic as an alternative to Latin American.

kurt9 said at November 8, 2010 5:55 PM:

"The Next 100 Million" gives a fascinating insight into the mind of Joel Kotkin. The book is quite frank about the general reduction of opportunity and upward mobility between now and 2050. Discussion of the effects this on society actually takes up much of the discussion in the book. Yet, he argues for continued immigration and that, despite the general decline of opportunity and upward mobility, that we will still be better off with that extra 100 million people than without it. He makes the usual obligatory comments that increased population and a diverse one at that will make for a more "vibrant" (don't you just love this word?) and "dynamic" society. In other words, Kotkin argues that population increase, by itself and independent of increases in personal standard of living, is a good thing.

Needless to say, I challenge this assertion.

Much of his book is given to the acceptance of reduced social and economic mobility. If this is to be the case, what is the point of increased "vibrancy" and "dynamism"? If we cannot seek life satisfaction through continual upward mobility and increased material standard of living, would we not seek life satisfaction through other outlets, such as leisure activities and outdoor activities? If so, wouldn't we be better off limiting our population where it is now rather than increasing it another 100 million? If having more people cannot increase our material standard of living, then what is the point of having more people? Prey tell?

John C. said at November 10, 2010 9:50 AM:

Anglo is a racist term, the equivalent of calling all Hispanics Mexes or PRs. It has little to do with "adopting a Mexican or Central American outlook" it's just another expression of White-hating racism from the left, it identifies its users as members of the whites who hate whites club, like those silly little South American wool hats do. It also has another value to the White-hating, Wisean, genocidal left, however - using the proper term "white" is a little too on the nose, it makes the racial nature of the struggle just a little too obvious. As you say, no one calls themselves "Anglo" and the vast numbers of whites who are not of English extraction (the practical meaning of Anglo-Saxon, though even they don't use the term) are not emotionally effected by the term. It's simply another divide and conquer tactic from the Nazi left. Everyone basically understands it means white, but it takes just enough off to sow a little confusion, allowing the Left to publicly vent their blatantly racist beliefs without arousing their victims too much.

SF said at November 10, 2010 1:41 PM:

In total tax revenue divided by income, California is 16th highest. http://www.statemaster.com/graph/eco_sta_tax_lev_rev_as_of_inc-state-tax-levels-revenue-income
In total tax revenue per capita, California is 12th. http://www.statemaster.com/graph/eco_sta_tax_lev_rev_per_cap-tax-levels-revenue-per-capita

Anyway, it still takes a 2/3 majority to raise taxes.
Jerry Brown said that in the event of a budget impasse, he will present the voters with a choice between Democratic and Republican proposals, plus his own. This would be a golden opportunity for Republicans. A lot of cuts that couldn't be imposed by a legislature controlled by special interests will be very popular with voters.

Anon said at November 10, 2010 8:06 PM:

as one of those top 5%ers who left 8 years ago. I was born in CA and lived there during the golden years. worked in Aerospace, surfed and had a good life there. Then the state was mexicanized over the last 20 years and it was not a place to raise kids, so we left.

If you mix things, you find out that they quickly reduce to their lowest common denominator. By taking on so much illegal immigration of 8th grade caliber, that is where CA is reducing to; An 8th grade Mexicanized mindset. what it did for Mexico, it will do for California, or any other state that continues to allow it. It is a clear choice, it does not have to be that way. Bell is a perfect example of the Mexican way, outright, in your face, corruption on a horrific scale. California is headed there quickly. I am preparing to rescue my mother from there soon as the neighborhood is on the mexicanized fringes and with little doubt, the unemployment is causing increased crime.

The patient is terminal.

Texas will take over the lead for a while. if they are unable to stem the tide of mexicanization, then they too will suffer the same fate. Maybe the laws like Arizona's will be put in place and we can actually turn this around? We can only hope.


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