8 ms·

California Is in Big Trouble Again, After Averting a Collapse in the 2000s

34 points by siberianbear 7y ago

rayiner 7y ago
To add to the parade of horrible, California also has the highest poverty rate in the country once you account for cost of living: https://www.sandiegouniontribune.com/opinion/the-conversation/sd-california-poverty-rate-20180913-htmlstory.html https://www.sandiegouniontribune.com/opinion/the-conversatio.... It’s also one of the poorest states overall—the median Californian has less purchasing power than the median Mississippian: https://www.advisorperspectives.com/dshort/updates/2018/11/15/median-household-purchasing-power-for-the-50-states-and-dc https://www.advisorperspectives.com/dshort/updates/2018/11/1....
- pcwalton 7y ago
  I have trouble seeing how the fifth largest economy by GDP in the world (11th per capita) can be fairly described as "poor". If that's "poor", then the word "poor" doesn't mean anything. Edit: I'm not saying that the state doesn't have high inequality. It does, as does the US in general. I'm saying it's not poor. California is rich, but does not distribute that wealth equitably.
  - davinic 7y ago
    Averages in this case are meaningless. The distribution matters more than the average. Never cross a river that is "on average 4 feet deep".
    - pcwalton 7y ago
      Both matter. California has a high Gini coefficient (as does the US in general). That's a problem, and one we need to fix. But it's counterbalanced to an extent by high GDP.
  - cobbzilla 7y ago
    Suggestion: Walk under a highway overpass, observe tent city, revise opinion.
    - pcwalton 7y ago
      I live in San Francisco and observe homelessness every day. What I see is a rich state that is failing to distribute its wealth equitably.
      - unlinked_dll 7y ago
        It's not just homelessness. How would you live in this state making 50k/yr? 40k? The state is completely dystopian outside of tech, especially once you get out of San Francisco (hell I was there yesterday - place seems pretty damn poor to me) Just as an anecdote I live in a 650 sq ft 1 bedroom apartment. The previous tenants were a family of four. My good friend lives a block away - he's cycled through phases of 3-4 room mates in a run-down 2 bedroom apartment. There are millions of people in this state packed together like sardines and paying 40-50% of their meager income for that privilege. This state is riddled with economic inequality, we may not be a poor economy but we have an enormous number of poor people shouldering its weight.
        pcwalton 7y ago
        There are plenty of people I know happily employed in the entertainment industry in the largest city in the state. "Completely dystopian outside of tech" is a total exaggeration.
        unlinked_dll 7y ago
        I'm in the entertainment industry in that city. It's the most dystopian place in the state in my opinion. It pays worse and burns people out faster than tech from what I've seen. Some people get lucky and have a stable job with decent income. There are far more scraping by on the odd PA gig trying to make something happen. And the city itself is a dump outside a few outrageously priced neighborhoods.
  - Rebelgecko 7y ago
    Just because the economy is big doesn't mean that everyone is getting a big share of it
  - NeedMoreTea 7y ago
    Welcome to inequality. Not everyone will get some crazy rate in SV. The guy who serves your latte, or cares for elderly parents should be able to afford to live and eat somewhere. Many will be stuck well below the poverty line.
    - NotSammyHagar 7y ago
      What! That's communism. People should be able to have a decent life, working one job full time? Next you'll say a single accident shouldn't be able to destroy your life because of the cost of the medical care.
  - sremani 7y ago
    What? The poverty rate in California is high and California also has significant welfare population, for 10% of US population share, California has 20-30% share for Welfare (fact-check me here). Outside of the elite coastal town, interior California has lot of poverty and the other aliments.
  - pchristensen 7y ago
    California is rich, but California has a huge % of and total # of people that are poor. Also, they don't look poor by national standards, but they are poor when the expenses of living in CA are taken into account.
  - rayiner 7y ago
    I didn't say it was "poor" I said it was "one of the poorest states." When we compare countries, we generally look at PPP-adjusted GDP per capita. For California it's about $48,000 (2009 dollars). That's poorer than the national average of $50,577. It's about the same as Lousiana at $47,869. So when you take out the distributional concern by looking at the average instead of the median, California goes from being in the bottom 10 to merely being in the bottom half. (The analysis above combines this list of GSP-per-capita, https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per..., with this list of price deflators, https://files.taxfoundation.org/legacy/docs/%24100%20Map-state-01.png https://files.taxfoundation.org/legacy/docs/%24100%20Map-sta...).
    - pcwalton 7y ago
      We're not going to solve the debate over whether to use nominal GDP or PPP-adjusted GDP here, but let's just say that it's hardly settled which is more reflective of a country being rich or poor. I also don't know if I'd trust the conservative-leaning Tax Foundation to provide an unbiased estimate of state PPP. Doing a Google search for "GDP PPP of US states" and clicking through some citations brings up a very different set of rankings that WaPo cites [1]. It places California in the top 15 along with the other economic powerhouses, right between Switzerland and Norway, not exactly known for being poor countries. UBS [2] says that Los Angeles has the highest purchasing power of any major city in the world! Who's right? Clearly it highly depends on one's methodology. [1]: https://www.washingtonpost.com/blogs/govbeat/wp/2014/08/26/if-the-uk-was-a-u-s-state-it-would-be-the-second-poorest-behind-alabama-and-before-mississippi/ https://www.washingtonpost.com/blogs/govbeat/wp/2014/08/26/i... [2]: https://www.ubs.com/microsites/prices-earnings/en/explore/?category=Domestic%20Purchasing%20Power&indicator=General_Domestic%20Purchasing%20Power_Net%20(New%20York%20%3D%20100)&split=false https://www.ubs.com/microsites/prices-earnings/en/explore/?c...
      - xyzzyz 7y ago
        The WaPo (actually The Spectator) methodology is clearly inapplicable, because they adjust for average US PPP, instead of within-state PPP, which doesn’t make sense if your goal is to compare different states to one another.
trentnix 7y ago
The article is full of excuses to argue California has simply experienced lots of bad luck, burying the lede. Really, its just that California’s spending has been and continues to be unsustainable and it’s primary efforts to raise revenue - raising taxes - has the side effect of encouraging those with mobility (citizens and businesses) to relocate elsewhere.
- bcrosby95 7y ago
  For states, California is actually middle of the pack when it comes to per capita budget. Given that, you're going to have a difficult time convincing me there's a spending problem.
  - at-fates-hands 7y ago
    It's not necessarily the spending that is a problem. Its the fact California relies on a very small percentage of high earners to carry the majority of the tax burden. At some point people will decide its too much as the state continues to increase taxes to pay for its overzealous spending and leave, creating an even bigger problem.
- lern_too_spel 7y ago
  The problem is that Prop 13 for so long restricted the legislature from modernizing the tax structure or directing funds appropriately that taxes on new residents are very high and basic services are not appropriately funded.
- RangerScience 7y ago
  > raising taxes - has the side effect of encouraging those with mobility (citizens and businesses) to relocate elsewhere. This kind of argument always seems a little... short-sighted, to me. Sure, raising taxes has a chilling effect, but spending that money in the right-enough ways has an attractive effect. AFAIK, LA wants to / has raised taxes in order to put in far more parks (addressing "green deserts") and to address food deserts. This makes more neighborhoods more desirable, which then has an overall attractive effect. Looking at one part of a system and saying "well, this is bad because it doesn't achieve terminal values", well, look at the _entire_ system, and _then_ measure achievement of those values.
iscrewyou 7y ago
Pretty disingenuous to not mention the rainy day and surplus funds: https://www.politifact.com/california/statements/2018/dec/18/jerry-brown/does-california-have-budget-surplus-nearly-30-bill/ https://www.politifact.com/california/statements/2018/dec/18... Include all facts if you are trying to make a point. Yes we have issues when it comes to poverty and housing but we are not doomed.
yumraj 7y ago
I believe the fundamental problem of CA is Prop-13 which has a substantial impact of its revenue as lots of very high value properties pay a substantially low property tax. On top of that, in many cases, as the property tax is so low, people who otherwise would not be able to afford such high value properties continue to hold them, leading to an artificial increase in the overall property values. If Prop-13 is abolished, a lot of properties will enter the market, and overall revenue would increase resolving many of CA's and local government's woes, including that of the public education system. OTOH, I know that abolishing Prop-13 is an impossibility. Our best hope is that the split tax roll is successful that that would require at least the commercial and industrial property to be regularly reassessed and taxed at their full value.
- riku_iki 7y ago
  > I know that abolishing Prop-13 is an impossibility. it can be replaced with some very slow tax increase, so market will return into normal pace in 5-10-20 years.
- deleted 7y ago
  [deleted]
- jdhn 7y ago
  I hear this repeated a lot, and I'm not so sure I buy it. Yes, Prop 13 limits how much taxes can go up, but if that's the case, then why wouldn't you try to build more to capture more tax? I'm willing to bet that easing zoning restrictions would help with revenue generation.
  - buerkle 7y ago
    Prop-13 limits the amount of building cities want to approve because the rate of taxation can't keep up with the revenue required to handle all the infrastructure costs associated with more buildings. I build an apartment building my tax rate increase is limited to 2%, but if new infrastructure required grows at greater than 2% due than that screws the city budget even more.
  - ItsDeathball 7y ago
aazaa 7y ago
> But California’s political system is making it hard to respond to these pressures. Thanks to a 1978 ballot initiative called Proposition 13, California cities have stringent limits on raising revenue from local property taxes. That forces the state to provide many services, financing them with hefty income taxes. Those are inherently more unreliable than property taxes, since wealthy taxpayers can move away (while property can’t move), and since California’s income taxes fluctuate a lot because they depend so much on the profits residents earn on volatile stock prices. Prop 13 is widely cited as one of California's biggest weaknesses. I suspect the state will be looking quite closely at other ways to tax property, given that property taxes are relatively easy to assess and enforce, and depending on your economic situation, have a built-in progressive quality to them. What restrictions does the state have around imposing taxes on real estate sales? For example, could the state impose a 1% tax on profits from the sale of a private residence under $50,000? I know this would put the state at odds with the federal government, but could it be a way around Prop 13?
- Rebelgecko 7y ago
  The big push now is to exempt commercial property from prop 13
pcwalton 7y ago
> The state legislature needs to pass bills to allow greater housing density and more construction throughout the state. The Legislature did just that with the ADU bills that effectively abolish single-family zoning throughout the state. Additionally, SB 330 (the Housing Crisis Act) puts a stop to some of the more egregious forms of NIMBYism. Citizens can sue cities that refuse to follow the law under the Housing Accountability Act, which was recently strengthened; no such recourse is available to residents of most other states. More must be done, but California is now leading the way in cracking down on NIMBYism. I predict that states like Texas are going to see the NIMBY pattern play out in time (if they aren't already—look at Austin), leading to skyrocketing housing costs. They will have to do the same thing in time. California is just ahead of the curve.
- gbronner 7y ago
  At the same time, they passed rent control, and the jurisdictions that have the worst housing crises have the strongest rent control. Once a few people rent out their ADUs and then find that they can't evict their tenants as their needs change, very few people are going to be willing to invest the several hundred thousand necessary to permit and build one.
  - pcwalton 7y ago
    The statewide rent cap is significantly above the amount rents have been rising on their own. It also expires after 10 years. And the cities with the strongest rent control--San Francisco and Los Angeles--are also the cities that have been seeing a boom in ADU construction, even though the dysfunctional rent control policies of those cities apply to a lot of those ADUs. The statewide rent cap isn't likely to be a meaningful impediment to ADU construction. Much more problematic is the cost of constructing the ADU in the first place.
not_real_acct 7y ago
"Thanks in large part to spiraling urban rents, the homeless population increased by 5.3% from 2010 to 2018, in a state that already has almost half of the nation’s homeless. In Los Angeles and San Francisco, the crisis is especially acute, with destitute people and pitiful tent encampments crowding the sidewalks." This is ridiculous. California is filled with homeless people because: 1) there's a nationwide opioid crisis 2) if you're going to be homeless, might as well move to where the weather is nice In a recent survey in Los Angeles, somewhere around 90% of the homeless reported a substance abuse problem. This is impacting Seattle and Portland too; it's a lot easier to be homeless in Portland than Phoenix.
- gridlockd 7y ago
  > This is ridiculous. Perhaps, but why let a perfectly useful argument for cheaper housing go to waste, just because it's nonsense?
  - NotSammyHagar 7y ago
    I doubt opioids are 90% of the problem. Every day I read about a senior citizen who is living in their car, has some retirement money, and usually not a drug problem but they lost their housing because it's too expensive. This is the situation in Seattle. There are tons of people with drug addictions, but there are also clearly lots of people economically pushed onto the street. So we still need more cheaper housing.
- at-fates-hands 7y ago
  While I agree the opioid crisis hasn't helped much, the main problem before the crisis was the gentrification of many of the urban areas in California. Skyrocketing rent and an influx of dot com companies pushed a lot of people in these communities right back onto the street.
rectang 7y ago
Note: this is an opinion piece, not a news piece. I never feel like I can trust pessimistic opinion pieces on California's economy. Many pundits want California to fail for various reasons, and trying to dredge useful information out of them is difficult.
- amiantos 7y ago
  Reading the comments on this piece makes it pretty clear who the target market for op-eds like this is. Someone suggests that living in California is like living in Venezuela.
  - bcrosby95 7y ago
    I've had certain family members say they always thought California would return to Mexico. I managed to calmly explained why no president would EVER let that happen.
    - commandlinefan 7y ago
      California returning to Mexico seems fairly unlikely to me as well (it brings in a lot federal income tax, for one thing), but I’m sort of curious what exactly you say to your family. After all, republicans might like to be rid of that electoral college base.
      - bcrosby95 7y ago
        That California is 15% of the US GDP and it would be suicide to let that go. It has huge centers of tech, entertainment, and defense. That it could cause a cascade of other states to split. That it would take some very important ports with them. That strategically the US would never give up that much coastline. That California pays more to the fed than the fed puts into the state. As a joke I also like to throw in that Ronald Reagan's presidential library is here. Heh.
unlinked_dll 7y ago
I mean we can fix it. Allow high density, tall buildings in urban centers, discourage centralized working environments and encourage satellite offices throughout the state, remove fees/expedite permit applications for new construction contingent on low/middle income rents, and get people out of fire areas.
zarro 7y ago
The problem is the "services" the state is providing are economically unprofitable. Proposition 13 was passed to force the state to have controlled expenditures by not allowing the majority to extort the minority by using their property as extortion through property taxes. The causes are actually bad laws which are put into place by an increasing majority of people living in want trying to force the "State" into providing it services they cannot pay for themselves. The "state" can't afford to pay for their services either, and the net effect is to try and coerce people into a redistribution of money from people that have money to those that don't have as much to cover these expenditures. Because the mechanism used (income taxes) to coerce people to do this now isn't efficient enough now to meet their ever increasing demands, and the voters force the government (who created the problem) to fund these "services" without really thinking about how they will fund their expenditures - making it the governments problem to figure out - which it can't without using coercion. This thereby allows them to continue uncontrolled expenditure in an ever increasing downward spiral to catastrophe as in effect they are spending 'other peoples money' in the hopes that "eventually these invoices will be paid" through some sort of government sponsored coercion mechanism forcing socialized redistribution by holding peoples and companies properties or income hostage or some other such method with the same result. Its really quite simple and clever and funny that it still works.
- zippergz 7y ago
  I think you exceeded your "quota" of quotation marks.
holler 7y ago
California should abolish the income tax like WA/NV/FL and watch people move back in droves.
- ijiiijji1 7y ago
  Don't those states have higher sales and property taxes?Perhaps if people across the economic spectrum were taxed what they could afford in the buckets of sales, income and property on a sliding scale that didn't benefit the rich so much with a zillion loophole gifts via self-dealing corruption in Sacramento, then migration might increase.
JohnClark1337 7y ago
I love the author's acceptance that unity == a one party system

34 points by siberianbear 7y ago

To add to the parade of horrible, California also has the highest poverty rate in the country once you account for cost of living: https://www.sandiegouniontribune.com/opinion/the-conversation/sd-california-poverty-rate-20180913-htmlstory.html https://www.sandiegouniontribune.com/opinion/the-conversatio.... It’s also one of the poorest states overall—the median Californian has less purchasing power than the median Mississippian: https://www.advisorperspectives.com/dshort/updates/2018/11/15/median-household-purchasing-power-for-the-50-states-and-dc https://www.advisorperspectives.com/dshort/updates/2018/11/1....

pcwalton 7y ago
I have trouble seeing how the fifth largest economy by GDP in the world (11th per capita) can be fairly described as "poor". If that's "poor", then the word "poor" doesn't mean anything. Edit: I'm not saying that the state doesn't have high inequality. It does, as does the US in general. I'm saying it's not poor. California is rich, but does not distribute that wealth equitably.
- davinic 7y ago
  Averages in this case are meaningless. The distribution matters more than the average. Never cross a river that is "on average 4 feet deep".
  - pcwalton 7y ago
    Both matter. California has a high Gini coefficient (as does the US in general). That's a problem, and one we need to fix. But it's counterbalanced to an extent by high GDP.
- cobbzilla 7y ago
  Suggestion: Walk under a highway overpass, observe tent city, revise opinion.
  - pcwalton 7y ago
    I live in San Francisco and observe homelessness every day. What I see is a rich state that is failing to distribute its wealth equitably.
    - unlinked_dll 7y ago
      It's not just homelessness. How would you live in this state making 50k/yr? 40k? The state is completely dystopian outside of tech, especially once you get out of San Francisco (hell I was there yesterday - place seems pretty damn poor to me) Just as an anecdote I live in a 650 sq ft 1 bedroom apartment. The previous tenants were a family of four. My good friend lives a block away - he's cycled through phases of 3-4 room mates in a run-down 2 bedroom apartment. There are millions of people in this state packed together like sardines and paying 40-50% of their meager income for that privilege. This state is riddled with economic inequality, we may not be a poor economy but we have an enormous number of poor people shouldering its weight.
      - pcwalton 7y ago
        There are plenty of people I know happily employed in the entertainment industry in the largest city in the state. "Completely dystopian outside of tech" is a total exaggeration.
        unlinked_dll 7y ago
        I'm in the entertainment industry in that city. It's the most dystopian place in the state in my opinion. It pays worse and burns people out faster than tech from what I've seen. Some people get lucky and have a stable job with decent income. There are far more scraping by on the odd PA gig trying to make something happen. And the city itself is a dump outside a few outrageously priced neighborhoods.
- Rebelgecko 7y ago
  Just because the economy is big doesn't mean that everyone is getting a big share of it
- NeedMoreTea 7y ago
  Welcome to inequality. Not everyone will get some crazy rate in SV. The guy who serves your latte, or cares for elderly parents should be able to afford to live and eat somewhere. Many will be stuck well below the poverty line.
  - NotSammyHagar 7y ago
    What! That's communism. People should be able to have a decent life, working one job full time? Next you'll say a single accident shouldn't be able to destroy your life because of the cost of the medical care.
- sremani 7y ago
  What? The poverty rate in California is high and California also has significant welfare population, for 10% of US population share, California has 20-30% share for Welfare (fact-check me here). Outside of the elite coastal town, interior California has lot of poverty and the other aliments.
- pchristensen 7y ago
  California is rich, but California has a huge % of and total # of people that are poor. Also, they don't look poor by national standards, but they are poor when the expenses of living in CA are taken into account.
- rayiner 7y ago
  I didn't say it was "poor" I said it was "one of the poorest states." When we compare countries, we generally look at PPP-adjusted GDP per capita. For California it's about $48,000 (2009 dollars). That's poorer than the national average of $50,577. It's about the same as Lousiana at $47,869. So when you take out the distributional concern by looking at the average instead of the median, California goes from being in the bottom 10 to merely being in the bottom half. (The analysis above combines this list of GSP-per-capita, https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per_capita https://en.wikipedia.org/wiki/List_of_U.S._states_by_GDP_per..., with this list of price deflators, https://files.taxfoundation.org/legacy/docs/%24100%20Map-state-01.png https://files.taxfoundation.org/legacy/docs/%24100%20Map-sta...).
  - pcwalton 7y ago
    We're not going to solve the debate over whether to use nominal GDP or PPP-adjusted GDP here, but let's just say that it's hardly settled which is more reflective of a country being rich or poor. I also don't know if I'd trust the conservative-leaning Tax Foundation to provide an unbiased estimate of state PPP. Doing a Google search for "GDP PPP of US states" and clicking through some citations brings up a very different set of rankings that WaPo cites [1]. It places California in the top 15 along with the other economic powerhouses, right between Switzerland and Norway, not exactly known for being poor countries. UBS [2] says that Los Angeles has the highest purchasing power of any major city in the world! Who's right? Clearly it highly depends on one's methodology. [1]: https://www.washingtonpost.com/blogs/govbeat/wp/2014/08/26/if-the-uk-was-a-u-s-state-it-would-be-the-second-poorest-behind-alabama-and-before-mississippi/ https://www.washingtonpost.com/blogs/govbeat/wp/2014/08/26/i... [2]: https://www.ubs.com/microsites/prices-earnings/en/explore/?category=Domestic%20Purchasing%20Power&indicator=General_Domestic%20Purchasing%20Power_Net%20(New%20York%20%3D%20100)&split=false https://www.ubs.com/microsites/prices-earnings/en/explore/?c...
    - xyzzyz 7y ago
      The WaPo (actually The Spectator) methodology is clearly inapplicable, because they adjust for average US PPP, instead of within-state PPP, which doesn’t make sense if your goal is to compare different states to one another.

trentnix 7y ago

The article is full of excuses to argue California has simply experienced lots of bad luck, burying the lede. Really, its just that California’s spending has been and continues to be unsustainable and it’s primary efforts to raise revenue - raising taxes - has the side effect of encouraging those with mobility (citizens and businesses) to relocate elsewhere.

bcrosby95 7y ago
For states, California is actually middle of the pack when it comes to per capita budget. Given that, you're going to have a difficult time convincing me there's a spending problem.
- at-fates-hands 7y ago
  It's not necessarily the spending that is a problem. Its the fact California relies on a very small percentage of high earners to carry the majority of the tax burden. At some point people will decide its too much as the state continues to increase taxes to pay for its overzealous spending and leave, creating an even bigger problem.
lern_too_spel 7y ago
The problem is that Prop 13 for so long restricted the legislature from modernizing the tax structure or directing funds appropriately that taxes on new residents are very high and basic services are not appropriately funded.
RangerScience 7y ago
> raising taxes - has the side effect of encouraging those with mobility (citizens and businesses) to relocate elsewhere. This kind of argument always seems a little... short-sighted, to me. Sure, raising taxes has a chilling effect, but spending that money in the right-enough ways has an attractive effect. AFAIK, LA wants to / has raised taxes in order to put in far more parks (addressing "green deserts") and to address food deserts. This makes more neighborhoods more desirable, which then has an overall attractive effect. Looking at one part of a system and saying "well, this is bad because it doesn't achieve terminal values", well, look at the _entire_ system, and _then_ measure achievement of those values.

iscrewyou 7y ago

Pretty disingenuous to not mention the rainy day and surplus funds: https://www.politifact.com/california/statements/2018/dec/18/jerry-brown/does-california-have-budget-surplus-nearly-30-bill/ https://www.politifact.com/california/statements/2018/dec/18... Include all facts if you are trying to make a point. Yes we have issues when it comes to poverty and housing but we are not doomed.

yumraj 7y ago

I believe the fundamental problem of CA is Prop-13 which has a substantial impact of its revenue as lots of very high value properties pay a substantially low property tax. On top of that, in many cases, as the property tax is so low, people who otherwise would not be able to afford such high value properties continue to hold them, leading to an artificial increase in the overall property values. If Prop-13 is abolished, a lot of properties will enter the market, and overall revenue would increase resolving many of CA's and local government's woes, including that of the public education system. OTOH, I know that abolishing Prop-13 is an impossibility. Our best hope is that the split tax roll is successful that that would require at least the commercial and industrial property to be regularly reassessed and taxed at their full value.

riku_iki 7y ago
> I know that abolishing Prop-13 is an impossibility. it can be replaced with some very slow tax increase, so market will return into normal pace in 5-10-20 years.
deleted 7y ago
[deleted]
jdhn 7y ago
I hear this repeated a lot, and I'm not so sure I buy it. Yes, Prop 13 limits how much taxes can go up, but if that's the case, then why wouldn't you try to build more to capture more tax? I'm willing to bet that easing zoning restrictions would help with revenue generation.
- buerkle 7y ago
  Prop-13 limits the amount of building cities want to approve because the rate of taxation can't keep up with the revenue required to handle all the infrastructure costs associated with more buildings. I build an apartment building my tax rate increase is limited to 2%, but if new infrastructure required grows at greater than 2% due than that screws the city budget even more.
- ItsDeathball 7y ago

aazaa 7y ago

> But California’s political system is making it hard to respond to these pressures. Thanks to a 1978 ballot initiative called Proposition 13, California cities have stringent limits on raising revenue from local property taxes. That forces the state to provide many services, financing them with hefty income taxes. Those are inherently more unreliable than property taxes, since wealthy taxpayers can move away (while property can’t move), and since California’s income taxes fluctuate a lot because they depend so much on the profits residents earn on volatile stock prices. Prop 13 is widely cited as one of California's biggest weaknesses. I suspect the state will be looking quite closely at other ways to tax property, given that property taxes are relatively easy to assess and enforce, and depending on your economic situation, have a built-in progressive quality to them. What restrictions does the state have around imposing taxes on real estate sales? For example, could the state impose a 1% tax on profits from the sale of a private residence under $50,000? I know this would put the state at odds with the federal government, but could it be a way around Prop 13?

Rebelgecko 7y ago
The big push now is to exempt commercial property from prop 13

pcwalton 7y ago

> The state legislature needs to pass bills to allow greater housing density and more construction throughout the state. The Legislature did just that with the ADU bills that effectively abolish single-family zoning throughout the state. Additionally, SB 330 (the Housing Crisis Act) puts a stop to some of the more egregious forms of NIMBYism. Citizens can sue cities that refuse to follow the law under the Housing Accountability Act, which was recently strengthened; no such recourse is available to residents of most other states. More must be done, but California is now leading the way in cracking down on NIMBYism. I predict that states like Texas are going to see the NIMBY pattern play out in time (if they aren't already—look at Austin), leading to skyrocketing housing costs. They will have to do the same thing in time. California is just ahead of the curve.

gbronner 7y ago
At the same time, they passed rent control, and the jurisdictions that have the worst housing crises have the strongest rent control. Once a few people rent out their ADUs and then find that they can't evict their tenants as their needs change, very few people are going to be willing to invest the several hundred thousand necessary to permit and build one.
- pcwalton 7y ago
  The statewide rent cap is significantly above the amount rents have been rising on their own. It also expires after 10 years. And the cities with the strongest rent control--San Francisco and Los Angeles--are also the cities that have been seeing a boom in ADU construction, even though the dysfunctional rent control policies of those cities apply to a lot of those ADUs. The statewide rent cap isn't likely to be a meaningful impediment to ADU construction. Much more problematic is the cost of constructing the ADU in the first place.

not_real_acct 7y ago

"Thanks in large part to spiraling urban rents, the homeless population increased by 5.3% from 2010 to 2018, in a state that already has almost half of the nation’s homeless. In Los Angeles and San Francisco, the crisis is especially acute, with destitute people and pitiful tent encampments crowding the sidewalks." This is ridiculous. California is filled with homeless people because: 1) there's a nationwide opioid crisis 2) if you're going to be homeless, might as well move to where the weather is nice In a recent survey in Los Angeles, somewhere around 90% of the homeless reported a substance abuse problem. This is impacting Seattle and Portland too; it's a lot easier to be homeless in Portland than Phoenix.

gridlockd 7y ago
> This is ridiculous. Perhaps, but why let a perfectly useful argument for cheaper housing go to waste, just because it's nonsense?
- NotSammyHagar 7y ago
  I doubt opioids are 90% of the problem. Every day I read about a senior citizen who is living in their car, has some retirement money, and usually not a drug problem but they lost their housing because it's too expensive. This is the situation in Seattle. There are tons of people with drug addictions, but there are also clearly lots of people economically pushed onto the street. So we still need more cheaper housing.
at-fates-hands 7y ago
While I agree the opioid crisis hasn't helped much, the main problem before the crisis was the gentrification of many of the urban areas in California. Skyrocketing rent and an influx of dot com companies pushed a lot of people in these communities right back onto the street.

rectang 7y ago

Note: this is an opinion piece, not a news piece. I never feel like I can trust pessimistic opinion pieces on California's economy. Many pundits want California to fail for various reasons, and trying to dredge useful information out of them is difficult.

amiantos 7y ago
Reading the comments on this piece makes it pretty clear who the target market for op-eds like this is. Someone suggests that living in California is like living in Venezuela.
- bcrosby95 7y ago
  I've had certain family members say they always thought California would return to Mexico. I managed to calmly explained why no president would EVER let that happen.
  - commandlinefan 7y ago
    California returning to Mexico seems fairly unlikely to me as well (it brings in a lot federal income tax, for one thing), but I’m sort of curious what exactly you say to your family. After all, republicans might like to be rid of that electoral college base.
    - bcrosby95 7y ago
      That California is 15% of the US GDP and it would be suicide to let that go. It has huge centers of tech, entertainment, and defense. That it could cause a cascade of other states to split. That it would take some very important ports with them. That strategically the US would never give up that much coastline. That California pays more to the fed than the fed puts into the state. As a joke I also like to throw in that Ronald Reagan's presidential library is here. Heh.

unlinked_dll 7y ago

I mean we can fix it. Allow high density, tall buildings in urban centers, discourage centralized working environments and encourage satellite offices throughout the state, remove fees/expedite permit applications for new construction contingent on low/middle income rents, and get people out of fire areas.

zarro 7y ago

The problem is the "services" the state is providing are economically unprofitable. Proposition 13 was passed to force the state to have controlled expenditures by not allowing the majority to extort the minority by using their property as extortion through property taxes. The causes are actually bad laws which are put into place by an increasing majority of people living in want trying to force the "State" into providing it services they cannot pay for themselves. The "state" can't afford to pay for their services either, and the net effect is to try and coerce people into a redistribution of money from people that have money to those that don't have as much to cover these expenditures. Because the mechanism used (income taxes) to coerce people to do this now isn't efficient enough now to meet their ever increasing demands, and the voters force the government (who created the problem) to fund these "services" without really thinking about how they will fund their expenditures - making it the governments problem to figure out - which it can't without using coercion. This thereby allows them to continue uncontrolled expenditure in an ever increasing downward spiral to catastrophe as in effect they are spending 'other peoples money' in the hopes that "eventually these invoices will be paid" through some sort of government sponsored coercion mechanism forcing socialized redistribution by holding peoples and companies properties or income hostage or some other such method with the same result. Its really quite simple and clever and funny that it still works.

zippergz 7y ago
I think you exceeded your "quota" of quotation marks.

holler 7y ago

California should abolish the income tax like WA/NV/FL and watch people move back in droves.

ijiiijji1 7y ago
Don't those states have higher sales and property taxes?Perhaps if people across the economic spectrum were taxed what they could afford in the buckets of sales, income and property on a sliding scale that didn't benefit the rich so much with a zillion loophole gifts via self-dealing corruption in Sacramento, then migration might increase.

JohnClark1337 7y ago

I love the author's acceptance that unity == a one party system