Thursday, March 11, 2010

How Bad Is It In California?

This bad:

In 2007 Raymond Keating formulated a Small Business Survival Index, which is a composite of various aspects of the climate for business in a particular state: business and personal taxes, regulations, mandates, and so on. In that index California ranked 49 among the 50 states. Rhode Island ranked just above California, and its unemployment rate is 12.7. At the bottom of the Index is D.C., and its unemployment rate is 12.1.

In the component parts of the SBSI index, California ranks worst of 51 (including D.C.) on top personal tax rates, worst on top capital gains tax rates, 42 on corporate taxes, 43 on health insurance mandates, 46 on electric utility costs, 47 on workman's compensation costs, rock bottom again on state gas taxes, 45 on state and local government five year spending trends, and 47 on state and local per capita government spending. It also ranks 49 among the states on the US Economic freedom index, and it has the highest state sales tax rate too: where some states have an income tax but no sales tax, and others have a sales tax but no income tax, California has both, AND it has the highest rates in both.

Anyone who says that we aren't taxed enough is either ignorant, an idiot, or both. And yes, I've heard plenty who say we Californians aren't taxed enough.


Ellen K said...

I keep telling you, Colorado has mountains and snow for skiing. Texas has low taxes and beaches and lots of open space (if you ignore Houston and the Austin sprawl). Oklahoma is surprisingly free of liberalism. There are 49 other states. Sooner or later either things will change or the people who can will leave. California seems to be on a path to becoming a third world extension of Baja.

socalmike said...

I agree with Ellen - people have already started leaving, but more will.....soon.
At a dept chair meeting I attended the other day (I chair the Tech dept here at our hs - i teach engineering), one of our Assistant Supes was there, and told us straight faced that there was a week-long meeting in Sacramento in December about secession. No lie, I'm not making this up. Secession. Another one of our asst supes was at that week-long meeting. Yikes. It's that bad.

mazenko said...

Some states collect enough revenue for their spending, and others don't. It's a matter of basic accounting, and while the SBSI index is valid, it is subjective to say it ranks the "worst" in taxes. Higher or lower taxes aren't good or bad - it's a matter of matching revenue to spending.

This is something that European countries have figured out, and Americans won't admit. If you can't rein in the spending, you can't cut the revenue.

Countries like Sweden and Switzerland figure out what they want their government to do, and then they collect revenue accordingly. Americans have a set idea about what they will pay and what they want the government to do - and they ignore the discrepancies.

Californians, and Coloradans to an extent with TABOR, are naive and less than honest with themselves about what government does and how to pay for it. I am against the huge debts and deficits and in support of PAYGO. But Californians have long rejected higher taxes to pay for the very programs they either pass themselves or pass through their representatives. This leads to debt and deficits.

This is argued much more effectively and credibly than I can by David Walker, the former comptroller of the US, as well as the Concord Coalition and the Peterson Foundation. I have long supported his fiscally conservative positions, and I was echoing his railing about the debt and deficits back in 2002 with the first Bush tax cuts, which I feel were fiscally irresponsible.

The same holds true at the state level. And comparatively to the industrialized world, Americans are not overtaxed - not for the government they have selected. As Walker points out, we are actually under-taxed - that is we are under-taxed for the government and society we have created. If we have this much debt and deficit, we have obviously not been collecting enough revenue to meet the spending to which we are committed. That is being under-taxed.

Thus, it's simply about collecting the revenue necessary to fund the spending. And states in debt and deficit are failing in that regard.

TeacherBlogger411 said...

This is a great blog, congratulations.

California should be the "toast" of the country. It should also be the richest state in the union. We have the largest population, by far, and pay the highest sales tax. Where is all that revenue going? We have the Silicon Valley, the Imperial Valley, and the San Joaquin Valley. We are loaded with resources. Shame on our state legislature. They spend millions on keeping illegal aliens in our jails and then tell teachers they can't afford us. Teachers, who have worked hard, graduated from college, work way beyond our stated contract, PAY our taxes, and follow the law. But, the state can't afford us. Here's an idea... FIRE the state legislators!

mazenko said...

Really, 411? Really?

The state is facing a budget deficit of $40 billion, and you are placing it on the cost of illegal aliens in prison?


Now, I think I understand, as I noted, how uninformed voters in California are contributing to the problem.

Ellen K said...

I have a question-since Cali's economy is in the toilet, exactly what would be the purpose of secession? I know that when Gov. Perry in Texas mentioned it as an aside, it was because Texas only gets around 87 cents back from every dollar they send to Washington. I am pretty sure Cali gets more in government money because Cali embraces more of the social welfare programs than Texas does. Cali should be the "Golden State"-all of the factors of resources and people are there. But the mindset that is driven from people like Boxer and Pelosi is killing the state economically, socially and structurally. In short, the same programs implemented in Cali have bankrupted the state-and the federal elected officials intend to implement the same bad medicine on a national scale. Any wonder why talk of secession is brewing? But if we all secede, what's left?

Darren said...

I've not heard any talk of secession, and we all know it's just even if it *is* taking place. I wouldn't mind splitting California into Coastal California and Inland California, though.

teacherblogger411 said...


Obviously, 20 to 40 million dollars is not going to pull our state out of its deficit. But don't you think 20 to 40 million dollars could save some jobs? And which part of our population deserves that money more in your opinion? My ONE example of state government mismanagement was meant to point out the poor choices our government officials are making. The California State Legislature has a job approval rating of under 20%. It is the lowest approval rating of any government body. I am very interested to hear your opinion of why California's economy is so upside-down.

teacherblogger411 said...


I did not see your earlier post. However, my stance remains the same. You talk about the government Americans have selected. I AM NOT selecting, nor condoning, that type of government. This is not the type of government I grew up with nor is it the type of government that created this country.

mazenko said...

411, You may not be selecting that type of government, but it's not only about You.

As I noted, we live in a representative democracy. Voters have selected the representatives and referenda - especially referenda that freezes revenue while not freezing spending (pretty clueless decision there) - that have led to these deficits.

Basic math would tell you this - a 2/3 requirement for tax increases that isn't matched by a 2/3 requirement for any spending or tax cuts or referenda is a recipe for debt and deficit.

That's my opinion, and the historical facts, for why California is so upside-down.

Anonymous said...

"Californians [...] are naive and less than honest with themselves about what government does and how to pay for it. [...] But Californians have long rejected higher taxes to pay for the very programs they either pass themselves or pass through their representatives. This leads to debt and deficits."

The tax burden here in CA is highly progressive (a word with an unfortunate positive connotation in the minds of many). The state gets about half of its revenue from personal income taxes, and about half of it-- which is 25% of the state's revenue-- is paid by less than 1% of the population.

Some of the state's problems are caused by voters who don't have to pay directly for the things they (and their representatives) vote for.

If there was a flat tax, and people were obligated to write a check every April for what they owe in state income tax, instead of having it withheld from their paychecks, I would imagine many voters would be more reluctant to support ridiculous and costly ballot measures, or vote for politicians who are eager to increase the tax burden.

teacherblogger411 said...


"411, You may not be selecting that type of government, but it's not only about You."

I am standing up for what I believe is the best course of action for this state and country. I am part of a constituency, and I have a right to have my opinion heard along with everyone else's.

I am not a "ME" type person, and my opinion is shared by many.

I sense a tone of personal attack on your part (calling me uninformed). Not that I can't defend myself, but I find it kind of interesting that you attack me instead of the problem. Also, how can you possibly discern all this from short blog entries?

Having said that, I do appreciate your knowledge and willingness to debate your position. Thank you for answering my question.

mazenko said...

Thanks, 411.

It wasn't an attack - it was just an observation. As a nation of 300 million people with ideology split in thirds, there is much room for disagreement, and much need for negotiation and debate.

mazenko said...

Ellen, it's interesting to note your praise of Texas as a place of low taxes in criticism of California's budget woes. But what about Texas coming shortfall of at least $11 billion in 2011, as a result of those low taxes and property tax cuts in 2006. Sounds like the property tax issue is going to rear its head in Texas as well. And the shortfall would have hit this year if Texas had accepted so much federal stimulus money to offset the shortfalls like the other states. And, of course, low tax zealots in Texas are claiming the state can just cut road funding - but it's already set by the Constitution.