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California's tax regime is really backward. I suspect Tesla's departure is just the tip of the iceberg and that the repeal of the SALT deduction in 2017 really
by danhak 5y ago
California's tax regime is really backward. I suspect Tesla's departure is just the tip of the iceberg and that the repeal of the SALT deduction in 2017 really hastened this trend.
High earners pay an effective tax rate of > 50%. They are partially picking up the slack from Prop 13, which artificially distorts the housing market by allowing longtime homeowners to pay property taxes based on decades-old assessed values while sitting on millions in equity gains.
So young, high earners see the state taking a massive chunk of their paycheck in exchange for middling infrastructure and pitiful public schools while simultaneously putting its finger on the scale of a wildly inflated housing market.
The exodus will only pick up steam unless policymakers get their act together.
- brightball 5y agoI’ve long suspected that the Democratic obsession with federal policy is to try to reduce the appeal of other states where companies may want to move. It’s often seemed like people in California would prefer that a manufacturing operations operate in Asia and come through their ports rather than operate in the middle/south US.
- outside1234 5y agoI don't understand any of that - if anything - the opposite is true.
- deleted 5y ago[deleted]
- SavantIdiot 5y agoNaw, Cali just wants clean air and water, and manufacturing doesn't want to pay to not screw the planet. That's why companies pillage Asia: their environment is for sale to the lowest bidder. Capitalism without regulation, baby! You're making the same conservative argument about wages: if you pay a living wage companies will flee. No, if a company can't pay a living wage, it shouldn't exist. Likewise, if a company can't manufacture products without destroying the environment, it shouldn't manufacture those products. I'm just a conservative. A nature conservative.
- 8note 5y agoTax havens are bad for the places where economic activity actually happens. From California's perspective, I don't think it matters whether that haven is in Asia or the middle/south US. It's just as bad for California either way
- chickenpotpie 5y agoI would argue that actually Texas has the backwards taxes considering they’re the 2nd most regressive tax system in the county https://washingtonstatewire.com/am-i-taxed-too-much-a-comparative-look-at-washington-state/ https://washingtonstatewire.com/am-i-taxed-too-much-a-compar...
- jeffbee 5y agoEven a single filer with an AGI of ten million dollars has an effective California tax rate of 13%
- CheezeIt 5y agoThe public schools aren’t pitiful at all. California has great schools.
- scottrogowski 5y agoIf we are judging by one completely objective measure (high school graduation rates) California is currently the lowest-ranked state in the country: https://worldpopulationreview.com/state-rankings/high-school-graduation-rates-by-state https://worldpopulationreview.com/state-rankings/high-school...
- CheezeIt 5y agoI disagree with that metric, because many students should not finish high school — I think the graduation rate is too high in every state. I would compare states based on testing performance, keeping in mind California’s demographics and the absurdly high number of kids who don’t speak English at home. I should say I think its schools are fine, rather than great.
- seanmcdirmid 5y agoBy that website, the lowest ranked state is California (83% graduation rate), the second lowest ranked state is...Texas (84% graduation rate). So...California is slightly worse than Texas on schooling? I wonder if something else is going on for California and Texas to rank behind Mississippi, Alabama, and Louisiana? I'd bet that the issue with the standard of measure, not the actual quality of education.
- lamroger 5y agoif you can afford living close to one or pay for private schooling
- kelnos 5y agoHell, in SF that first bit doesn't even help, due to the broken lottery system here. It's probably the main reason why there are so few children (by percent) in SF when compared to other cities. Parents make the logical decision to move out of SF when their kids become school-age because they have near-zero control over the school their kids end up at. Alternatively, they put their kids in private school, which is out of reach cost-wise for many families.
- amznthrwaway 5y agoFun fact, you need to be earning over $4M/yr to have an effective tax rate > 50% in CA.
- _jal 5y ago> middling infrastructure Compared to what?
- dr_dshiv 5y agoThe Netherlands
- nine_k 5y agoMmm, Northeast?
- wnevets 5y agoCertainly not Texas
- newshorts 5y agoNot sure. I wouldn’t draw a comparison between Austin’s infrastructure and the bay area’s.
- yupper32 5y agoCompared to states with comparable infrastructure but less tax.
- _jal 5y agoAnd one of those would be....?
- yupper32 5y agoCalifornia has the highest income tax rate of any state. So... any state with comparable or worse infrastructure. And there's quite a few of them [1] [2] [3] [1] https://www.usnews.com/news/best-states/rankings/infrastructure https://www.usnews.com/news/best-states/rankings/infrastruct... [2] https://infrastructurereportcard.org/state-item/california/ https://infrastructurereportcard.org/state-item/california/ [3] https://www.usatoday.com/story/money/2019/07/08/states-that-are-falling-apart/39644781/ https://www.usatoday.com/story/money/2019/07/08/states-that-...
- newhotelowner 5y ago> The exodus will only pick up steam unless policymakers get their act together. I used to live in California. There is no better state than California. If house price falls, I would buy another house in California.
- eloff 5y agoI work in tech, despite California being the center of that industry, I've resisted relocating to there every time. I don't much care for it. Tastes vary. If the housing market wasn't so fucked it might be a different story.
- sjg007 5y agoI concur. If you can’t get a house though and have to live in crappy apartments California can suck.
- option 5y agoclimate and natural beauty hard to match. Everything else sucks
- gautamcgoel 5y agoJust out of curiosity, why do you like it so much?
- seanmcdirmid 5y agoThe problem with California is that it is too crowded so no one goes there anymore.
- newhotelowner 5y agoWeather - not hot, not cold, not raining all the time Diversity Friendly people Liberal state Tech industry
- guardiangod 5y ago>High earners pay an effective tax rate of > 50%. Musk has not paid any tax because he hasn't cashed out any of his stock options yet. Some of his options will expire next year so he will pay tax then, but I am sure California will get the lion share of the tax revenue (as Musk lived in California up to 2021.)
- refurb 5y agoThe Propublica article said Musk paid $500M in tax on a $1.5B options exercise. Is that incorrect?
- prepend 5y agoTesla employees lots of people who pay income tax. Capital gains is taxed on the residence at time of sale, not time of purchase. So if Musk sells when he’s not a resident of CA, he won’t pay CA taxes.
- outside1234 5y agoThat's not actually true - California will probably consider this California income because he earned it while in California.
- deadmutex 5y agoAre you a tax lawyer by any chance? or is this just guessing?
- KingMachiavelli 5y agoThis is somewhat unique to CA but it was in the news recently. https://www.sambrotman.com/personal-income-tax-residency-california/income-sources-california-state-tax https://www.sambrotman.com/personal-income-tax-residency-cal... https://www.ftb.ca.gov/forms/misc/1004.html https://www.ftb.ca.gov/forms/misc/1004.html
- holler 5y ago
- deleted 5y ago[deleted]
- nabaraz 5y agoI think the exodus from California to Texas is overblown. The choice is between Earn above average salary and enjoy good weather, politics, and outdoors. Earn a median salary and enjoy okay weather and lower taxes.
- madengr 5y agoGood politics is subjective.
- bluejekyll 5y agoTo back this up, CA and TX tax people differently, but CA is more fair: https://www.motherjones.com/kevin-drum/2019/11/taxes-are-surprisingly-similar-in-texas-and-california/ https://www.motherjones.com/kevin-drum/2019/11/taxes-are-sur... By More fair, I mean, CA has a similar tax rate across incomes, but does place more burden on top earners than TX does. TX on the other hand, is unfairly taxing people more at lower incomes, and less for people at higher incomes. TX policies don't align with my moral beliefs–I would not decide to raise my children there given the way the state is governed. That's of course a personal opinion, but I don't want to spend the rest of my life fighting for rights that we have in CA.
- yonran 5y agoI disagree with that article (which repeats the ITEP WhoPays report). It incorrectly assumes that the incidence of the property tax is on the renters that occupy a house rather than the landowner. If you think that property taxes are more regressive in Texas than California you would predict that poor people pay more for rent in Texas than California, when the truth is the reverse. And if you think that property taxes are regressive, you would predict that low property taxes reduce inequality, but the truth is that California’s low property taxes only enrich landowners at the expense of the poor and are the biggest source of inequality. The property tax is a rather progressive tax insofar as its incidence is on those who gain from excluding others, while it allows taxes on labor to be low.
- kelnos 5y ago
- deleted 5y ago[deleted]
- SavantIdiot 5y agoThe exodus has been soundly proven to be a myth. [1] But assuming it isn't, there aren't many better places to go. Texas is a joke. Traffic is worse than LA in the major cities and it is run by Christian zealots. Yeah maybe you pay fewer taxes but the other quality-of-life tradeoffs aren't worth it. [1] https://www.sfgate.com/local/article/California-exodus-is-just-a-myth-massive-UC-16301134.php https://www.sfgate.com/local/article/California-exodus-is-ju...
- 015a 5y agoThere are better places to go, hypothetically. Realistically: People are going to Texas. Obviously they are; ranked by GDP per state, California is #1, Texas is #2. The only people who give a shit about the Christian zealots are people hundreds of miles away outside the state; people like Elon Musk don't care, and still move there, and move their companies with them.
- kelnos 5y ago> The only people who give a shit about the Christian zealots are people hundreds of miles away outside the state That seems untrue, given Texas' shift toward purple. Certainly wealthy people in Texas (regardless of their politics) aren't affected too much by who sits in the state house, but there are plenty of Democrats in Texas who aren't wealthy. And just as a random example, I bet women who are looking to terminate unwanted pregnancies in Texas right now are probably sick of the Christian zealots.
- xvector 5y agoIt's such a terrible state. Infested with ultrawide roads and zero walkability. Women don't have bodily autonomy - imagine trying to raise a daughter in such an environment. I'd hope that alone would deter engineers with families from the state. Not to mention the a worthless human being of a governor. Backwards politics and ideals. It's a joke of a state, everything wrong with America hyper-concentrated on steroids. The pros of moving to Texas is that housing is cheaper. The downside is that you have to live in fucking Texas.
- notJim 5y ago> High earners pay an effective tax rate of > 50% How so? I put a salary of $300k in SF here, and came up with 38%: https://smartasset.com/taxes/california-tax-calculator#c0piTTkcUJ https://smartasset.com/taxes/california-tax-calculator#c0piT.... Obviously Fremont workers do not need to live in SF.
- hytdstd 5y agoFrom that calculator, it seems that you need to be making $2.3M in Fremont, CA to get to 50%.
- Epenthesis 5y agoPut in 3 M$/yr and you'll get 50.7%. Not a lot of people hitting that regularly, but I imagine it can sting a little if you've got a more proletarian salary normally and are hitting that region just once because of say, a start up liquidity windfall
- redisman 5y agoWorlds smallest violin
- pvarangot 5y agoI payed >50% for two years but I was above 400k. Honestly, coming from a third world country where I got taxed more and having had to work in Austin and Atlanta before on previous jobs, taxes are the least of my complains for California. Yeah they should fix property taxes... but my main complaint is that even though all politicians like speaking a mouthful about helping the poor and how broken healthcare is, every single government program that's supposed to help the mentally ill is utterly and completely broken beyond belief. And I'm saying this coming from Argentina that as a country has around the same population and way less GDP. Literally the only thing about California that doesn't feel "first wordly" as all the nice places in Europe I've been to is how it deals with people that need mental health or that have housing issues. I tried discussing this with every other politician I meet or something but besides condescending smiles because of the perceived trauma they think growing up in Latin America caused (it didn't) I never get any iota of acknowledgement that something in the world is wrong. Except for the Republicans, which is the only problem in the US, apparently.
- somethoughts 5y agoResource driven economies like Texas can maintain a low income tax by deriving most of their tax revenue from property taxes and taxing oil and gas revenues. IMHO the high income tax regime found in California is actually a function of high density, high income, knowledge based earners moving in. If enough of them arrive, demands for services (schools, fire, police) and infrastructure (i.e. light rail, etc.) will increase. The original NIMBY locals will initially love the increasing property values and new restaurants... until their property tax bills start rising to astronomical sums. The state will then need to push for Prop 13 like property tax capping legislation at which point the state legislature will need to raise funds somehow and magically they will end up with a 10%-20% state income tax on super high income earners like Elon, et. al. That said - just a IMHO prediction and just saying that you can't blame it entirely on just California(ns) being dysfunctional. :) [1] https://www.youtube.com/watch?v=AbXLnmLEevQ https://www.youtube.com/watch?v=AbXLnmLEevQ Property tax values in Austin just saw the highest increase in Austin History
- refurb 5y agoThis seems like a bizarre way to torture the narrative to say high taxes are good, no, required? Have you seen where the money goes? It ain’t supporting a “technology infrastructure”.
- CryptoPunk 5y ago>>If enough of them arrive, demands for services (schools, fire, police) and infrastructure (i.e. light rail, etc.) will increase. The high taxes of CA are due to the state sector having taken over the political system, via control over the dominant narrative/ideology. To give just one example, emergency workers can retire at 55 with 90% of their pension, that averages $108,000 per year. California now has $1 trillion in pension obligations for its unionized public sector workers.
- gopi 5y agoCalifornia actually spends less per student on education than even many poor states. For all their virtue signaling about public transport, CA don't even have universal school bus service (which is table-stake in most states). Most parents drive individually and drop kids! Just compare the building/facilities of any top bay area public school with that of Texas. The former look like shack while the latter look like mini universities. Bay area schools still rank higher because of students and parents, its nothing to do with the state.
- dragonwriter 5y ago> repeal of the SALT deduction in 2017 The SALT deduction wasn't repealed (for which a coherent argument could be made, though it would still be a bad idea), it was capped (for which there isn't even a principled argument.) > High earners pay an effective tax rate of > 50%. “High earners pay high rates” isn't exactly a sign of a backward tax regime.