6 ms·

The Golden State’s War on Itself

lbrandy 16y ago
Interesting. Not too long ago I found out that not only does California have incredibly high state income taxes, but it also has really high state capital gains taxes. It actually amazes me that silicon valley has thrived under those burdens which leads me to ask two very important questions: 1. Why hasn't the high taxes driven people out of Silicon Valley (and will it?) 2. How is California broke? I come from Florida and in Florida, there are barely no state taxes at all because it's all on tourism. Somehow California has these insanely high taxes and still can't pay any bills. Other than blaming illegal immigrants (a dubious politically motivated response), I've never really gotten a straight up answer on what makes California and Florida so different.
- kevingadd 16y ago
  Part of the problem is that California is basically unable to raise certain tax rates without a state ballot measure, and our voters are not big fans of raising taxes. The only way to undo this (IIRC) is to pass a constitutional amendment, since that's how it was established in the first place. Our spending and policies are definitely out of whack, as demonstrated in the article, but not being able to raise taxes to compensate isn't helping either. I'm not a fan of raising taxes, but I consider our state being broke to be a bit worse.
  - anamax 16y ago
    > I'm not a fan of raising taxes, but I consider our state being broke to be a bit worse. Why is cutting spending not an option? CA's tax revenues are significantly higher than the spending just a few years ago. Would it really be unreasonable to cut back to that level of spending? (Note that unemployment is largely paid for by the federal govt, so ....)
- usaar333 16y ago
  I'm not sure about Florida, but some points about California: 1) Extremely generous social services 2) A bizarre (and arguably unfair) property tax regime. Property taxes on owned property only rise 2% a year. (very low, consider that my parent's Bay Area home has risen by about 5.7% yearly since the 1980s) What that leaves you with is entrenched residential and commercial property owners paying relatively very little in taxes. If you are a new resident though, you get no immediate benefit - your taxes are assessed at the purchased value. According to supporters, the law that set this up (Proposition 13) has saved taxpayers $528 billion (http://www.hjta.org/about-hjta/history-hjta http://www.hjta.org/about-hjta/history-hjta); that's $17.6 billion a year - pretty much the budget deficit of the state.
  - philwelch 16y ago
    The property tax situation sounds like a recipe for rent being more cost-effective than homeownership, which is indeed what we observe in California.
    - btilly 16y ago
      Only in the short term. If you stay in the same place for 20 years, home ownership becomes much more cost effective.
      - philwelch 16y ago
        Personally, I can't imagine staying in the same place for 20 years unless I was old and retired, and if I was old and retired I would retire to someplace cheaper. Opportunities come and go, and committing to live in the same place for 20 years is a huge risk if that place dries up and someplace else starts to boom.
      - ghshephard 16y ago
        Depends on when you buy, as always. I sold my Condo in 2006 for $535K (3222 Glendora Drive, #109, San Mateo, CA). It was last listed at $386K before the listing was finally removed. All we can really say is that in the last 50 years, home ownership was a better buy than renting. I don't know anyone confident about their 20 year forecasts regarding California Real Estate right now... As for me - I'm renting a room for $750/month. I don't think that I would ever have come out even if I hadn't sold my Condo. The key thing to realize, is that sometimes the decision isn't "Buy or Rent", it sometimes (in my case) is Downsize+Rent. Gives you flexibility + reduced costs.
- jseliger 16y ago
  Point two: see http://www.theatlantic.com/business/archive/2009/05/is-california-too-big-to-fail/17873/ http://www.theatlantic.com/business/archive/2009/05/is-calif... . Also http://www.theatlantic.com/business/archive/2009/05/should-we-blame-californias-government-or-its-citizens-for-the-deficit/18288/ http://www.theatlantic.com/business/archive/2009/05/should-w... . Some major problems: California's state constitution is a mess; its initiative process is out of control; conventional tax increases are impossible; Prop 13 distorts incentives. Many of these are structural issues. A bunch of articles have appeared on HN lately about how powerful, complex societies and institutions fail by being unable to flexibly adapt to change. That, in a nutshell, appears to be California's problem, which has been papered over to some extent by Silicon Valley Hollywood, agriculture, and weather. But even those rich sources of income can eventually be exhausted by the infinite demands of special interests and others.
  - WiseWeasel 16y ago
    I'm quite a fan of the initiative process in California. I mean, sure, it's been abused by short-sighted people, leading to things like three-strikes legislation overcrowding our prisons, but it has also brought us important social progress such as medical marijuana, and any sufficiently unpopular law is only a petition away from redress. It's encouraging that we enjoy the power to reform law from the bottom up in such a direct manner, and I wouldn't want to give up that power quite so readily, as those who toss around that 'out of control initiative process' talking point are so eager to do.
    - adharmad 16y ago
      Continuous interference is detrimental to efficient functioning of representative democracy. It is difficult for a government to rule if it is second-guessed by the voters using the initiative system. California's initiative system creates problems wherein the populace votes emotionally (PROP 8). A lot of times, the initiative system has a weakness in the fact that the voting public is easily swayed by easy simplifications of complex issues and is unable to see the big picture.
      - 16y ago
- tman 16y ago
  Other than blaming illegal immigrants (a dubious politically motivated response) Reference? I'd like to see what percentage of California's population is the result of post-1960's immigration, the total tax input from this segment and their costs in government services. I only point this out because some people I've come across on HN who think a Canadian-style immigration system is racist seem to think that public display of their own good intentions is much more important that looking up the numbers.
- vondur 16y ago
  We have the largest amount of illegal aliens in the nation. I have seen numbers listed from 9 billion a year up to 20 billion a year spent on public services for illegals. This would include education, health care, and public assistance. (California is known for having generous benefits compared to other states) This is in addition to all of the other problems mentioned in the article. Pensions for state workers is turning out to be a huge issue and is threatening to bankrupt many municipalities. (the city of Los Angeles for example) The wages of public employees has risen much greater than private sector in many cases. I just read about some gardeners that work a LAX who make $50K a year and the City of Bell was paying its city manager $800k a year. (extreme case)
lotusleaf1987 16y ago
This was submitted earlier today already wasn't it? http://news.ycombinator.com/item?id=1588934 http://news.ycombinator.com/item?id=1588934
- astine 16y ago
  I think that this is another publication of the same article.
  - lotusleaf1987 16y ago
    But still the same thing basically, isn't it?
    - startuprules 16y ago
      more informative than multiple submitted posts about techcrunch's fascination with foursquare.
- JustinSeriously 16y ago
  Yep. That one is on a different webpage so the HN duplicate check didn't come up.
sdurkin 16y ago
"Recently, though, the dream has been evaporating. Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent." This is the most shocking line from the article. How did they let costs balloon so badly?
- keltex 16y ago
  Because the state was swimming in money from tax receipts because the economy was doing so well. It's easy for legislators to give out stuff when there's a surplus.
  - artsrc 16y ago
    Or because they did not increase spending by this amount, 2003 might have been artificially low for accounting reasons: Expenditures are estimated to drop from $78.1 billion in 2002-03 to $70.8 billion in 2003-04, a 10 percent decline. Most of this decline can be explained by four factors: the VLF rate increase (which reduces state subventions to backfill local governments), new federal funds, borrowing to cover the state's 2003-04 pension obligations, and the Medi-Cal accounting shift from an accrual to cash basis. Absent these factors, underlying spending would be roughly equal between the two years. The 2003-04 spending level is considerably less than what would be required to maintain baseline spending for the year. http://www.lao.ca.gov/2003/major_features_03-04/major_features_03-04.html http://www.lao.ca.gov/2003/major_features_03-04/major_featur...
j_baker 16y ago
My instinct is to say that this is another case of correlation not implying causation. On the surface, we have two facts: * California has a huge budget deficit * California is declining economically I don't doubt that these two facts are true. Nor do I doubt that both facts affect each other. However, California is one of (if not the) largest economies in the US. I seriously doubt the situation is this simple. To place this solely at the feet of the state's progressive politics is a bit partisan. To me, this reads like a set of conservative talking points dressed up as an intellectual policy paper. EDIT: Not coincidentally, City Journal is published by a conservative think-tank: http://en.wikipedia.org/wiki/Manhattan_Institute http://en.wikipedia.org/wiki/Manhattan_Institute
guelo 16y ago
I classify as right-wing biased propaganda any article dealing with California's economics and politics that doesn't mention Prop 13.
- guelo 16y ago
  To the downvoters, why is it OK to ignore the law with by far the greatest impact on how California manages it's budget when explaining California's budget and political problems?
  - herdrick 16y ago
    Probably they are reacting negatively because California wouldn't seem to have a revenue problem. It's number 6 in % of income taxed. http://blogs.law.harvard.edu/philg/2010/01/10/visit-to-berkeley-california/ http://blogs.law.harvard.edu/philg/2010/01/10/visit-to-berke...
RobertL 16y ago
"The Answer is in the nature of Progressive Politics in California"..... Wow.. City-Journal.org hits nail on head. I'm impressed.

Interesting. Not too long ago I found out that not only does California have incredibly high state income taxes, but it also has really high state capital gains taxes. It actually amazes me that silicon valley has thrived under those burdens which leads me to ask two very important questions: 1. Why hasn't the high taxes driven people out of Silicon Valley (and will it?) 2. How is California broke? I come from Florida and in Florida, there are barely no state taxes at all because it's all on tourism. Somehow California has these insanely high taxes and still can't pay any bills. Other than blaming illegal immigrants (a dubious politically motivated response), I've never really gotten a straight up answer on what makes California and Florida so different.

kevingadd 16y ago
Part of the problem is that California is basically unable to raise certain tax rates without a state ballot measure, and our voters are not big fans of raising taxes. The only way to undo this (IIRC) is to pass a constitutional amendment, since that's how it was established in the first place. Our spending and policies are definitely out of whack, as demonstrated in the article, but not being able to raise taxes to compensate isn't helping either. I'm not a fan of raising taxes, but I consider our state being broke to be a bit worse.
- anamax 16y ago
  > I'm not a fan of raising taxes, but I consider our state being broke to be a bit worse. Why is cutting spending not an option? CA's tax revenues are significantly higher than the spending just a few years ago. Would it really be unreasonable to cut back to that level of spending? (Note that unemployment is largely paid for by the federal govt, so ....)
usaar333 16y ago
I'm not sure about Florida, but some points about California: 1) Extremely generous social services 2) A bizarre (and arguably unfair) property tax regime. Property taxes on owned property only rise 2% a year. (very low, consider that my parent's Bay Area home has risen by about 5.7% yearly since the 1980s) What that leaves you with is entrenched residential and commercial property owners paying relatively very little in taxes. If you are a new resident though, you get no immediate benefit - your taxes are assessed at the purchased value. According to supporters, the law that set this up (Proposition 13) has saved taxpayers $528 billion (http://www.hjta.org/about-hjta/history-hjta http://www.hjta.org/about-hjta/history-hjta); that's $17.6 billion a year - pretty much the budget deficit of the state.
- philwelch 16y ago
  The property tax situation sounds like a recipe for rent being more cost-effective than homeownership, which is indeed what we observe in California.
  - btilly 16y ago
    Only in the short term. If you stay in the same place for 20 years, home ownership becomes much more cost effective.
    - philwelch 16y ago
      Personally, I can't imagine staying in the same place for 20 years unless I was old and retired, and if I was old and retired I would retire to someplace cheaper. Opportunities come and go, and committing to live in the same place for 20 years is a huge risk if that place dries up and someplace else starts to boom.
    - ghshephard 16y ago
      Depends on when you buy, as always. I sold my Condo in 2006 for $535K (3222 Glendora Drive, #109, San Mateo, CA). It was last listed at $386K before the listing was finally removed. All we can really say is that in the last 50 years, home ownership was a better buy than renting. I don't know anyone confident about their 20 year forecasts regarding California Real Estate right now... As for me - I'm renting a room for $750/month. I don't think that I would ever have come out even if I hadn't sold my Condo. The key thing to realize, is that sometimes the decision isn't "Buy or Rent", it sometimes (in my case) is Downsize+Rent. Gives you flexibility + reduced costs.
jseliger 16y ago
Point two: see http://www.theatlantic.com/business/archive/2009/05/is-california-too-big-to-fail/17873/ http://www.theatlantic.com/business/archive/2009/05/is-calif... . Also http://www.theatlantic.com/business/archive/2009/05/should-we-blame-californias-government-or-its-citizens-for-the-deficit/18288/ http://www.theatlantic.com/business/archive/2009/05/should-w... . Some major problems: California's state constitution is a mess; its initiative process is out of control; conventional tax increases are impossible; Prop 13 distorts incentives. Many of these are structural issues. A bunch of articles have appeared on HN lately about how powerful, complex societies and institutions fail by being unable to flexibly adapt to change. That, in a nutshell, appears to be California's problem, which has been papered over to some extent by Silicon Valley Hollywood, agriculture, and weather. But even those rich sources of income can eventually be exhausted by the infinite demands of special interests and others.
- WiseWeasel 16y ago
  I'm quite a fan of the initiative process in California. I mean, sure, it's been abused by short-sighted people, leading to things like three-strikes legislation overcrowding our prisons, but it has also brought us important social progress such as medical marijuana, and any sufficiently unpopular law is only a petition away from redress. It's encouraging that we enjoy the power to reform law from the bottom up in such a direct manner, and I wouldn't want to give up that power quite so readily, as those who toss around that 'out of control initiative process' talking point are so eager to do.
  - adharmad 16y ago
    Continuous interference is detrimental to efficient functioning of representative democracy. It is difficult for a government to rule if it is second-guessed by the voters using the initiative system. California's initiative system creates problems wherein the populace votes emotionally (PROP 8). A lot of times, the initiative system has a weakness in the fact that the voting public is easily swayed by easy simplifications of complex issues and is unable to see the big picture.
    - 16y ago
tman 16y ago
Other than blaming illegal immigrants (a dubious politically motivated response) Reference? I'd like to see what percentage of California's population is the result of post-1960's immigration, the total tax input from this segment and their costs in government services. I only point this out because some people I've come across on HN who think a Canadian-style immigration system is racist seem to think that public display of their own good intentions is much more important that looking up the numbers.
vondur 16y ago
We have the largest amount of illegal aliens in the nation. I have seen numbers listed from 9 billion a year up to 20 billion a year spent on public services for illegals. This would include education, health care, and public assistance. (California is known for having generous benefits compared to other states) This is in addition to all of the other problems mentioned in the article. Pensions for state workers is turning out to be a huge issue and is threatening to bankrupt many municipalities. (the city of Los Angeles for example) The wages of public employees has risen much greater than private sector in many cases. I just read about some gardeners that work a LAX who make $50K a year and the City of Bell was paying its city manager $800k a year. (extreme case)

lotusleaf1987 16y ago

This was submitted earlier today already wasn't it? http://news.ycombinator.com/item?id=1588934 http://news.ycombinator.com/item?id=1588934

astine 16y ago
I think that this is another publication of the same article.
- lotusleaf1987 16y ago
  But still the same thing basically, isn't it?
  - startuprules 16y ago
    more informative than multiple submitted posts about techcrunch's fascination with foursquare.
JustinSeriously 16y ago
Yep. That one is on a different webpage so the HN duplicate check didn't come up.

sdurkin 16y ago

"Recently, though, the dream has been evaporating. Between 2003 and 2007, California state and local government spending grew 31 percent, even as the state’s population grew just 5 percent." This is the most shocking line from the article. How did they let costs balloon so badly?

keltex 16y ago
Because the state was swimming in money from tax receipts because the economy was doing so well. It's easy for legislators to give out stuff when there's a surplus.
- artsrc 16y ago
  Or because they did not increase spending by this amount, 2003 might have been artificially low for accounting reasons: Expenditures are estimated to drop from $78.1 billion in 2002-03 to $70.8 billion in 2003-04, a 10 percent decline. Most of this decline can be explained by four factors: the VLF rate increase (which reduces state subventions to backfill local governments), new federal funds, borrowing to cover the state's 2003-04 pension obligations, and the Medi-Cal accounting shift from an accrual to cash basis. Absent these factors, underlying spending would be roughly equal between the two years. The 2003-04 spending level is considerably less than what would be required to maintain baseline spending for the year. http://www.lao.ca.gov/2003/major_features_03-04/major_features_03-04.html http://www.lao.ca.gov/2003/major_features_03-04/major_featur...

j_baker 16y ago

My instinct is to say that this is another case of correlation not implying causation. On the surface, we have two facts: * California has a huge budget deficit * California is declining economically I don't doubt that these two facts are true. Nor do I doubt that both facts affect each other. However, California is one of (if not the) largest economies in the US. I seriously doubt the situation is this simple. To place this solely at the feet of the state's progressive politics is a bit partisan. To me, this reads like a set of conservative talking points dressed up as an intellectual policy paper. EDIT: Not coincidentally, City Journal is published by a conservative think-tank: http://en.wikipedia.org/wiki/Manhattan_Institute http://en.wikipedia.org/wiki/Manhattan_Institute

guelo 16y ago

I classify as right-wing biased propaganda any article dealing with California's economics and politics that doesn't mention Prop 13.

guelo 16y ago
To the downvoters, why is it OK to ignore the law with by far the greatest impact on how California manages it's budget when explaining California's budget and political problems?
- herdrick 16y ago
  Probably they are reacting negatively because California wouldn't seem to have a revenue problem. It's number 6 in % of income taxed. http://blogs.law.harvard.edu/philg/2010/01/10/visit-to-berkeley-california/ http://blogs.law.harvard.edu/philg/2010/01/10/visit-to-berke...

RobertL 16y ago

"The Answer is in the nature of Progressive Politics in California"..... Wow.. City-Journal.org hits nail on head. I'm impressed.