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Posts Tagged ‘California’

I’ve had some fun over the years by pointing out that Paul Krugman has butchered numbers when writing about fiscal policy in nations such as France, Estonia, Germany, and the United Kingdom.

So I shouldn’t be surprised that he wants to catch me making an error. But I’m not sure his “gotcha” moment is very persuasive. Here’s some of what he wrote for today’s New York Times.

Gov. Jerry Brown was able to push through a modestly liberal agenda of higher taxes, spending increases and a rise in the minimum wage. California also moved enthusiastically to implement Obamacare. …Needless to say, conservatives predicted doom. …Daniel J. Mitchell of the Cato Institute declared that by voting for Proposition 30, which authorized those tax increases, “the looters and moochers of the Golden State” (yes, they really do think they’re living in an Ayn Rand novel) were committing “economic suicide.”

Kudos to Krugman for having read Atlas Shrugged, or for at least knowing that Rand sometimes referred to to “looters and moochers.” Though I have to subtract points because he thinks I’m a conservative rather than a libertarian.

But what about his characterization of my position? Well, he’s right, though I’m predicting slow-motion suicide. Voting for a tax hike isn’t akin to jumping off the Golden Gate bridge. Instead, by further penalizing success and expanding the burden of government, California is engaging in the economic equivalent of smoking four packs of cigarettes every day instead of three and one-half packs.

Here’s some of what I wrote.

I’m generally reluctant to make predictions, but I feel safe in stating that this measure is going to accelerate California’s economic decline. Some successful taxpayers are going to tunnel under the proverbial Berlin Wall and escape to states with better (or less worse) fiscal policy. And that will mean fewer jobs and lower wages than otherwise would be the case.

Anyhow, Krugman wants readers to think that California is a success rather than a failure because the state now has a budget surplus and there’s been an uptick in job creation.

Here’s more of what he wrote.

There is, I’m sorry to say, no sign of the promised catastrophe. If tax increases are causing a major flight of jobs from California, you can’t see it in the job numbers. Employment is up 3.6 percent in the past 18 months, compared with a national average of 2.8 percent; at this point, California’s share of national employment, which was hit hard by the bursting of the state’s enormous housing bubble, is back to pre-recession levels. …And, yes, the budget is back in surplus. …So what do we learn from the California comeback? Mainly, that you should take anti-government propaganda with large helpings of salt. Tax increases aren’t economic suicide; sometimes they’re a useful way to pay for things we need.

I’m not persuaded, and I definitely don’t think this counts as a “gotcha” moment.

First, I’m a bit surprised that he wants to brag about California’s employment numbers. The Golden State has one of the highest joblessness rates in the nation. Indeed, only four states rank below California.

Second, I don’t particularly care whether the state has a budget surplus. I care about the size of government.

Krugman might respond by saying that the tax hike generated revenues, thus disproving the Laffer Curve, which is something that does matter to supporters of small government.

But the Laffer Curve doesn’t say that all tax hikes lose revenue. Instead, it says that tax rate increases will have a negative impact on taxable income. It’s then an empirical question to figure out if revenues go up a lot, go up a little, stay flat, or decline.

And what matters most of all is the long-run impact. You can rape and pillage upper-income taxpayers in the short run, particularly if a tax hike is retroactive. In the long run, though, people can move, re-organize their finances, and take other steps to reduce their exposure to the greed of the political class.

In other words, people can vote with their feet…and with their money.

And that’s what seems to be happening in California. Take a look at how much income has emigrated from the state since 1992.

Next we have a map showing which states, over time, are gaining taxable income and which states are losing income (and I invite you to look at how zero-income tax states tend to be very green).

The data isn’t population adjusted, so populous states are over-represented, but you’ll still see that California is losing while Texas is winning.

And here is similar data from the Tax Foundation.

So what’s all of this mean?

Well, it means I’m standing by my prediction of slow-motion economic suicide. The state is going to become the France of America…at least if Illinois doesn’t get there first.

California has some natural advantages that make it very desirable. And I suspect that the state’s politicians could get away with above-average taxes simply because certain people will pay some sort of premium to enjoy the climate and geography.

But the number of people willing to pay will shrink as the premium rises.

In other words, this Chuck Asay cartoon may be the most accurate depiction of California’s future. And this Lisa Benson cartoon shows what will happen between now and then.

But I won’t hold my breath waiting for a mea culpa from Krugman.

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When people in other nations ask me for evidence in favor of low taxes, I often will ask them to compare the economic performance of a high-tax nation like France with the performance of a nation such as Switzerland with less onerous taxes.

If I’m asked by Americans, I generally suggest that they compare different states. For instance, I show them evidence that California has a much more punitive tax system than Texas. And when you look at all the available state rankings, it’s clear that there’s a big difference.

*Tax burdens as a share of state income.

*The State Tyranny Index.

*Mercatus State Fiscal Ranking.

*State Business Tax Climate Index.

*Tax Foundation’s Tax Freedom Day.

*State Freedom Index.

*Death Spiral states.

And I then ask folks to compare economic performance. There’s lots of evidence that Texas is growing much faster and creating far more jobs than California.

Heck, it’s almost as if California politicians want to drive successful people out of the Golden State (fortunately, the state’s politicians didn’t read Walter Williams’ satirical column about putting a barbed-wire fence at the border). And when upper-income taxpayers leave the state, that means taxable income and tax revenue also escape.

Though it’s worth pointing out that the case for low taxes isn’t based solely on comparisons of Texas and California. We know, for instance, that states with no income taxes generally outperform other states.

Moreover, we don’t need to rely on casual empiricism. Here are some of the results from a new study published by the Mercatus Center.

…this study uses the average tax rate as a practical approximation of the overall state tax burden. …The coefficient of average tax rate is negative and statistically significant in both models, suggesting that a higher tax burden as a share of income reduces state economic growth. …Elasticity of −2.6, for example, implies that a 1 percent increase in the tax rate decreases economic growth by 2.6 percent, not percentage points. …While the aforementioned income growth results are insightful, the impact of taxation on the level of income is also important. …income tax progressivity has a significant negative relationship with real GSP per capita. …An alternative way to measure economic activity is to look at the number of private firms that operate in each state. …The main conclusion from the two regression models is that only personal income tax progressivity seems to have a significant negative effect on the growth in the number of firms. … By voting with their feet, people send a clear signal about where they prefer to live and work. …an empirical analysis of migration may show, indirectly, how taxes affect the flow of economic activity across states. …state net immigration rate is negatively related to the personal income tax rate … The net immigration rate also seems to have a significantly negative correlation with the average tax rate and income tax progressivity.

These findings should not be a surprise.

It’s common sense that economic activity – and taxpayers – will flow to states that don’t punish people for creating wealth.

Let’s now circle back to the Texas-vs-California comparisons. Take a look at this remarkable chart put together by Mark Perry of the American Enterprise Institute.

As you can see, total employment in Texas has jumped almost 10 percent since 2008. In California, by contrast, total employment has increased by less than 2/10ths of 1 percent.

So you can see why this Lisa Benson cartoon is so appropriate.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, none of this should be interpreted to suggest that Texas is perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

And even though California does worse than Texas in my Moocher Index, it’s worth pointing out that Californians are the least likely of all Americans to sign up for food stamps.

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It’s time to extinguish any lingering Christmas cheer. Today’s topic is over-bearing and tyrannical tax administration.

To be more specific, we’re going to look at the extent to which taxpayers are mistreated during the process of collecting revenue.

Yes, the amount that governments steal from you also is important, but that’s a topic we’ve already discussed on many occasions.

Moreover, we’re not going to focus on the IRS. Yes, the internal revenue service is infamous for its brutal and intrusive tactics. And I’m embarrassed to note that the United States scored very poorly in a Tax Oppression Index prepared by Switzerland’s Institut Constant.

But I want to focus today on places other than Washington. And the good news (at least relatively speaking) is that some countries scored even lower than the United States. The very worst nation was Italy, and you probably won’t be surprised that Germany (the country that figured out a way to use parking meters to tax prostitutes) and France were among the jurisdictions that also ranked below America.

This story from Brittany provides a rather appropriate glimpse at what it’s like to be a taxpayer in France.

For customers at the Mamm-Kounifl concert-café in Locmiquélic, carrying drinks trays and used glasses back to the bar was a polite tradition. But for social security agency URSAFF, it was also an infringement of labour laws because customers were acting like waiters, French local newspaper Le Télégramme reported.

But what’s really amazing is the way in which France’s revenue-hungry bureaucrats “caught” the alleged scofflaws.

“Around half-past midnight, a customer returned a drinks tray. She passed by the bar to go to the toilets. That was when it all kicked off.   My husband was pinned against the glass by a man. A woman leapt on me, showing her ID card and that’s when I realised it was a URSSAF check. They told me I had been caught using undeclared labour,” owner Markya Le Floch told Le Télégramme. …The authorities initially fined the pub owners €7,900 and briefly placed them in police custody. …URSSAF are still pursuing a social case and are now seeking €9,000 due to non-payment of the original fine.

Wow. This may be even more Orwellian than the FDA raid against the Amish farm that was selling unpasteurized milk to consenting adults. Or more absurd than the DEA busting a grandmother for buying cold medicine.

Imagine if the IRS adopted this French policy. If you take your significant other on a fancy date to McDonald’s and then carry your trash to the garbage receptacles, you’ll be guilty of providing “undeclared labor” and the tax police can then decide to impose taxes and fines because there could have been a taxable employee fulfilling that role.

I’m not joking. That seems to be the premise of the case in France.

Let’s now look at how taxpayers are treated by the various states here in America. Using data from the Council on State Taxation, the Tax Foundation has put together a map with grades for each state based on “good government” principles of tax administration.

Tax Administration Map of States

I’m surprised that Maine and Ohio rank so highly, particularly since neither state gets very good grades based on either Tax Freedom Day, aggregate tax burden, or the State Business Tax Climate.

But I’m not surprised that California ranks at the bottom. The state routinely gets bad grades on various measures of fiscal policy. No wonder so much income is moving out of the state. As for Louisiana, I can understand why Governor Jindal is so anxious to get rid of the state income tax.

Though the absence of a state income tax doesn’t guarantee good tax administration. Nevada, for instance, gets a poor grade in the COST survey.

P.S. If you like cartoons mocking California’s tax-and-spend politicians, click here, here, here, here, here, and here.

P.P.S. I’ve only shared one French-related cartoon, but you can seem my attempts at humorous captions here, here, and here.

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I feel sorry for the people of California.  They’re in a state that faces a very bleak future.

And why does the Golden State have a not-so-golden outlook?

Because interest groups have effective control of state and local political systems and they use their power to engage in massive rip-offs of taxpayers. One of the main problems is that there’s a bloated government workforce that gets wildly overcompensated. Here are some staggering examples.

A state nurse getting $331,000 of annual compensation.

A county administrator getting $423,000 pensions.

A state psychiatrist getting $822,000 of annual compensation.

Cops that get $188,000 of annual compensation.

A city manager getting $800,000 of annual compensation.

But overpaid bureaucrats are not the only problem. California politicians are experts at wasting money in other ways, such as the supposedly high-speed rail boondoggle that was supposed to cost $33 billion and now has a price tag of $100 billion.

You may be thinking that I’ve merely provided a handful of anecdotes, so let’s recycle some numbers that I first shared back in 2010.

California state spending has outgrown the state’s tax base by 1.3 percentage points annually for 25 years. Simple arithmetic dictates that in lieu of constant tax increases, this perpetuates a deficit. From 1985 to 2009 state GDP in California grew by 5.5 percent per year, on average (not adjusted for inflation). Annual growth in state spending was 6.8 percent, on average.

In other words, California politicians have routinely violated my Golden Rule for good fiscal policy. And when government grows faster than the productive sector of the economy for an extended period of time, bad things are going to happen.

And those bad things can happen even faster when upper-income taxpayers can leave the state.

Walter Williams sarcastically suggested last year that California barricade the state to prevent emigration, reminiscent of the actions of totalitarian regimes such as East Germany.

But since state politicians fortunately don’t have that power, successful taxpayers can escape, and hundred of thousands of them have “voted with their feet” to flee to states such as Texas.

One recent example is NBA superstar, Dwight Howard, who left the Los Angeles Lakers for the Houston Rockets. There are probably several reasons that he decided to make the switch, but the Wall Street Journal opines on a very big reason why he’ll be happier in Texas. The WSJ starts by looking at Mr. Howard’s two options.

NBA labor agreement…allows the Lakers to offer Mr. Howard $117 million over five years, compared to a maximum of $88 million over four years in Houston.

That looks about even when you look at annual pay, with the Lakers offering $23.4 million per year and the Rockets offering $22 million per year, but there’s another very important factor.

…this picture looks a lot different once the tax man cometh: “Howard would pay nearly $12 million in California tax over the four years if he signs with the Lakers, but only $600,000 in state tax should he sign with Houston. This means that a four-year deal with Houston would actually yield an additional $8 million in after-tax income.” California has the highest top rate for personal income in the nation, while Texas has no state income tax.

Some of you may be thinking this is no big deal. After all, the Lakers will sign somebody to take Dwight Howard’s place and that person will also get a huge salary.

That’s true, though Lakers fans probably aren’t happy that they’re destined to be a middle-of-the-pack team. The bigger point, though, is that there are tens of thousands of other high-paid people who can leave the state and there’s no automatic replacement. And many of them already have escaped.

Including very well-paid Chevron workers.

Ramirez California Promised LandNow that California’s moochers and looters have imposed an even higher top tax rate of 13.3 percent, expect that exodus to continue. Other pro athletes are looking to escape, and even famous leftists are thinking about fleeing.

In other words, Governor Jerry Brown can impose high tax rates, but he can’t force people to earn income in California. I don’t know whether to call this “the revenge of the Laffer Curve” or “a real life example of Atlas Shrugs,” but I know that California will be a very bleak place in 20 years.

P.S. Here’s the famous joke about California, Texas, and a coyote. And here’s an amusing picture of the California bureaucracy in (in)action.

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I’ve shared some outrageous stories about bureaucrats ripping off taxpayers.

So perhaps it is time to create a Bureaucrat-of-the-Year Award to honor the parasite who best exemplifies the unofficial SEIU motto of “Better Living on the Taxpayer Teat.”

And I think we already have a very strong candidate for 2013. Ms. Dorothy Dugger certainly has the right skills, working the system to get 19 months of vacation time after being forced out of her position. Here are some excerpts from a story in the Washington Times.

A former official of the Bay Area Rapid Transit raked in more than $333,000 last year without working a single day after she resigned under pressure in May 2011. Dorothy Dugger, the BART’s former general manager, quietly stayed on the payroll, burning off nearly 80 weeks of unused vacation time, drawing paychecks and full benefits for more than 19 months after she agreed to quit more than two years ago, San Jose Mercury News reported.

But that’s only part of the story. Yes, she was grossly overpaid and, yes, she has been bilking the grotesquely lavish fringe benefits system reserved for the bureaucracy.

But she also got a big fat severance package! Sort of a reward she received because she was an incompetent employee who wasn’t properly fired by an incompetent government.

But no worries. Taxpayers are there to smooth everything over.

The months of extra pay were in addition to the $920,000 Ms. Dugger was paid to leave after the BART’s board botched an effort to fire her by violating public meetings laws, San Jose Mercury News reported.

You’ll be happy to know, however, that Ms. Dugger is willing to acknowledge that some people may not be happy about

When asked by the paper if she thought the payout was fair to BART riders, she said: “That’s a fair issue to debate.”

How generous of her to say this is a “fair issue” now that she’s already pocketed all her loot and left “government service.”

But don’t forget that there are millions of other bureaucrats still on the payroll, earning more than us while working less than us.

And while Ms. Dugger has some impressive credentials for the Bureaucrat-of-the-Year Award, she does face some stiff competition. John Geary, for instance, used his job as a welfare bureaucrat to perpetrate a welfare-for-sex scam. And Susan Muranishi managed to snag a guaranteed yearly payment of $423,664 for the rest of her life.

We pay, they play.

P.S. Let’s be thankful we’re not Denmark.

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One of the great things about federalism, above and beyond the fact that it both constrains the power of governments and is faithful to the Constitution, is that is turns every state into an experiment.

We can learn what works best (though the President seems incapable of learning the right lesson).

We know, for instance, that people are leaving high-tax states and migrating to low-tax states.

We also know that low-tax states grow faster and create more jobs.

I particularly enjoy comparisons between Texas and California. Michael Barone, for instance, documented how the Lone Star State is kicking the you-know-what out of the Golden State in terms of overall economic performance.

I also shared a specific example of high-quality jobs moving from San Francisco to Houston. And I was also greatly amused by this story (and accompanying cartoons) about Texas “poaching” jobs from California.

In this discussion with Stuart Varney of Fox News, we discuss how Texas is leading the nation in job creation.

But there’s another part of this discussion that is very much worth highlighting.

As illustrated by the chart, we are enduring the worst overall job performance in any business cycle since the end of World War II.

I note in the interview that Obama inherited a bad economy and that Bush got us in the ditch in the first place with all his wasteful spending and misguided intervention.

But Obama also deserves criticism for doubling down on those failed policies.

His so-called stimulus was a flop. Dodd-Frank is a regulatory nightmare. Obamacare is looking worse and worse every day.

No wonder job creation is so anemic.

The real moral of the story, though, is that the poor are the biggest victims of Obama’s statism. They’re the ones who have been most likely to lose jobs. They’ve been the ones to suffer because of stagnant incomes.

Sort of brings to mind the old joke that leftists must really like poor people because they create more of them whenever they’re in charge.

P.S. Speaking of jokes, here’s an amusing comparison of Texas and California. If you want some California-specific humor, this Chuck Asay cartoon is great. And to maintain balance, here’s a Texas-specific joke on how to respond to an attacker.

P.P.S. To close on a serious point, California would be deteriorating even faster if it wasn’t for the fact that the state and local tax deduction basically means that the rest of the country is subsidizing the high tax rates in the not-so-Golden State. Another good argument for the flat tax.

P.P.P.S. At the bottom of this post, you’ll find a great Kevin Williamson column dismantling some sloppy anti-Texas analysis by Paul Krugman.

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A regular feature of this blog used to be a “taxpayers vs bureaucrats” series, which featured outrageous examples of government employees getting wildly overcompensated.

I even narrated a video on the topic of excessive pay and benefits for bureaucrats.

But I stopped the series because it was too depressing. How often can read stories like this, after all, and not feel glum about America’s future?

But I must lack willpower because I can’t resist writing about the latest scandal involving bureaucratic bloat.

Check out some of the ridiculous details about the woman who has earned the title of California’s Golden Bureaucrat.

Alameda County supervisors have really taken to heart the adage that government should run like a business — rewarding County Administrator Susan Muranishi with the Wall Street-like wage of $423,664 a year. For the rest of her life. …Muranishi’s annual pension will be equal to the dollar total of her entire yearly package — $413,000. She also has a separate executive private pension plan, for which the county chips in $46,500 a year.

Yes, you read correctly. She’ll be ripping off taxpayers “for the rest of her life.”

But if you want to get even more upset, check out how she’s bilking the people.

…in addition to her $301,000 base salary, Muranishi receives:

  • $24,000, plus change, in “equity pay’’ to guarantee that she makes at least 10 percent more than anyone else in the county.
  • About $54,000 a year in “longevity” pay for having stayed with the county for more than 30 years.
  • An annual performance bonus of $24,000.
  • And another $9,000 a year for serving on the county’s three-member Surplus Property Authority, an ad hoc committee of the Board of Supervisors that oversees the sale of excess land.

Like other county executives, Muranishi also gets an $8,292-a-year car allowance.

I’m relieved she’s getting a car allowance. The poor thing otherwise would have to rely on public transit. And isn’t it nice that she automatically gets a “performance bonus”? Sort of defeats the purpose, though, if it’s automatic. But what do I know, I’m just a taxpayer.

Jerry Brown MosesEven though I obviously lack the special insight needed to justify bloated compensation packages for California bureaucrats, I have enough common sense to know that the over-burdened taxpayers of California are being stretched beyond the breaking point – especially now that the looters and moochers have imposed a new 13.3 percent top tax rate on the state’s dwindling supply of high earners.

It’s no surprise that lots of high-paying jobs are relocating to states like Texas with better tax policy. Nor is it a surprise when pro golfers like Phil Mickelson warn they may leave the state. But when even a certified leftist like Bill Maher says he’s thinking about escaping, you know the situation is serious.

So for the umpteenth time, I will predict that the combination of bloated government and punitive taxation will lead to fiscal crisis in California.

Too much government spending and the Laffer Curve are not a good combination.

When you lure too many people into riding in the wagon and penalize those pulling the wagon, bad things happen. Doesn’t matter whether you’re looking at France or California.

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Maybe actors and other Hollywood types are only acting when they embrace statism?

We’ve already seen Hollywood liberals like Rob Schneider and Jon Lovitz complain about class-warfare policy.

And Gerard Depardieu moved out of France to escape the suicidally destructive taxes being demanded by French president Francois Hollande.

But the most shocking news is that even Bill Maher is getting irked that he’s being treated like a pinata.

Take a look at this short video. Ignore the first 2/3rds, which is Rachel Maddow making inane comments about the Ryan budget, and notice what Maher says in the final part.

Wow. He notes that the rich pay the overwhelming share of the federal tax burden (hmmm…I wonder if he watched this video).

And he’s not overly happy about California raping him with a new top tax rate of 13.3 percent.

Closet libertarian?

So now he’s saying he may move out of the state, just like Phil Mickelson. I won’t believe it ’til I see it, but for every well-known celebrity who publicly speculates about migrating to a zero-income tax state, there are probably dozens of investors, entrepreneurs, and small business owners who actually take that step.

And this, folks, is one of the reasons why class-warfare tax policy is so pointlessly destructive.

Reagan showed us in the 1980s that lower tax rates on upper-income taxpayers can generate more tax revenue. California is doing the same experiment, but in reverse.

Magnitudes matter, so we’ll have to wait and see before determining the net impact of Jerry Brown’s tax hike on California tax revenue. But I will blindly assert with confidence that revenues will be far below what politicians are hoping to collect.

In other words, we will see the revenge of the Laffer Curve, regardless of what Bill Maher decides.

P.S. I can’t help adding that Rachel Maddow doesn’t know what she’s talking about. The Ryan budget does not propose a net tax cut, so it’s absurd to claim – or even imply – that there will be “tax cuts for the rich” financed by changes to healthcare. That budget does propose reforms to Medicare and Medicaid, but those changes are to salvage the programs by making them sustainable.

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I’ve been pointing out the differences between California stagnation and Texas prosperity for quite some time.

And since California voters approved a new 13.3 percent top tax rate last November, I expect the gap to become even wider.

Simply stated, California is the France of America and Texas is the Cayman Islands of America.

So it’s understandable that the Governor of Texas is telling employers in California that his state has a better climate for job creation.

John Fund of National Review opines on this bit of competition between states.

Texas governor Rick Perry knows how to start a rumble. Last week, he spent a mere $24,000 on radio ads in California, urging firms there to move to Texas, with its “zero state income tax, low overall tax burden, sensible regulations, and fair legal system.” …He begins a four-day barnstorming tour of California today, touting Texas’s virtues to business owners. …several observers acknowledged that Perry has gotten the better of the battle.

Texas is clearly doing better on jobs, and it’s easy to avoid higher taxes when you obey Mitchell’s Golden Rule and restrain the burden of government spending.

Indeed, in the last five years Texas has gained 400,000 new jobs while California has lost 640,000. The Lone Star State’s rate of job growth was 33 percent higher than California’s last year, even as the Golden State finally pulled out of the recession. …Texas’s legislature has just trimmed its $188 billion two-year budget by 8 percent, and the state may have more revenue than it can legally spend because it is barred from raising outlays more than the rate of economic growth.

Here’s a very good Steve Breen cartoon about Perry’s fishing trip to the west coast.

Texas Seduction Cartoon

And remember my post about Phil Mickelson threatening to leave the state? Well, Chip Bok has a humorous take on that looming departure.

California Escape Cartoon

I’ve already written about the exodus of jobs from California, and expect even more in the future.

P.S. Texas is far from perfect. There’s a good bit of crony capitalism in the state. But there’s also some bad policy in the Cayman Islands, so the analogy is appropriate.

P.P.S. This “coyote” joke about California and Texas is the fourth-most viewed post in the history of this blog.

P.P.P.S. Here’s a photo that shows the California bureaucracy in action, and a cartoon featuring archaeologists from the future.

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I’ve already condemned the foolish people of California for approving a referendum to raise the state’s top tax rate to 13.3 percent.

This impulsive and misguided exercise in class warfare surely will backfire as more and more productive people flee to other states – particularly those that don’t impose any state income tax.

We know that people cross state borders all the time, and it’s usually to travel from high-tax states to low-tax states. And we’ve already seen some evidence that the state’s new top tax rate is causing a loss of highly valued jobs.

This mobility of labor and talent is one of the reasons why California is going to get a very painful lesson about the Laffer Curve.

Politicians (with help from short-sighted voters) can raise tax rates. But they can’t force people to earn income.

Now it looks like one of the super-rich is fed up and looking to make himself less vulnerable to California’s kleptocrats.

Here are some excerpts from an ESPN story.

Phil Mickelson said he will make “drastic changes” because of federal and California state tax increases. …The 42-year-old golfer said he would talk in more detail about his plans — possibly moving away from California or even retiring from golf… Mickelson said. “I’ll probably talk about it more in depth next week. …There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now. So I’m going to have to make some changes.” …”If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent,” said Mickelson, who lives in Rancho Santa Fe. “So I’ve got to make some decisions on what I’m going to do.”

He’s actually overstating his marginal tax rate. I suspect it’s closer to 50 percent.

California politicians got too greedy and now they may get 13.3 percent of nothing

But so what? It’s still outrageous and immoral that government is confiscating one-half of the income he generates.

Heck, medieval serfs were virtually slaves, yet they only had to give at most one-third of their output to the Lord of the Manor.

I hope he’s serious and that he escapes from the Golden State’s fiscal hell-hole.

And if he does, what will it mean for California government finances?

Well, here’s what Wikipedia says about his income.

According to one estimate of 2011 earnings (comprising salary, winnings, bonuses, endorsements and appearances) Mickelson was then the second-highest paid athlete in the United States, earning an income of over $62 million, $53 million of which came from endorsements.

Now let’s bend over backwards to make sure we’re not exaggerating. Notwithstanding the Wikipedia estimate, let’s assume his annual taxable income will be only $40 million for 2013 and beyond.

With a 10.3 percent top tax rate, California would collect about $4.12 million per year. And Mickelson apparently thought that was tolerable.

But guess how much the politicians will collect if he leaves the state? I’m tempted to say zero, but they may still get some revenue because of California-based tournaments and other factors.

Find Phil Mickelson

I can say with great confidence, however, that California won’t collect $5.32 million, which is probably what the politicians assumed when they seduced voters into approving the 13.3 percent tax rate.

After all, that assumption only works if Mickelson is willing to be a fiscal slave for Jerry Brown and the rest of the crooks in Sacramento.

As such, I’ll also state with certainty that California’s politicians won’t collect $4 million if Mickelson leaves for another state. Or $3 million. Or $2 million. Or even $1 million.

The best they can hope for is that Mickelson decides to stay in the state while also reducing his taxable income. In that scenario, the politicians might still pocket a couple of million dollars.

Not as much as they collected when the tax rate was 10.3 percent, and far less than what they erroneously assumed they would get with a 13.3 percent rate.

Regardless of Mickelson’s ultimate decision, California is going to be in trouble because most rich people – whether they’re golfers, celebrities, investors, or entrepreneurs – have considerable control over the timing, level, and composition of their income. And they can afford to move.

This is why you don’t want to be on the downward-sloping portion of the Laffer Curve. Everyone’s a loser, both politicians and taxpayers.

So we’re going to see the Laffer Curve get revenge on California and I’ll be first in line to say “serves you right, you blood-sucking parasites.”

If you want more information, here’s my video on the Laffer Curve.

And if you want to watch the full three-part series, they’re all included in this Laffer Curve lesson that I put together for the President. He seems oblivious to real-world evidence, but others may find the information useful.

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Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax.

No wonder the Lone Star State is growing faster and creating more jobs.

And the gap will soon get even wider since California voters recently decided to drive away more productive people by raising top tax rates.

But a key challenge for all governments is controlling the size and cost of bureaucracies.

Government employees are probably overpaid in both states, but the situation is worse in California, as I discuss in this interview with John Stossel.

But being better than California is not exactly a ringing endorsement of Texas fiscal policy.

A column in today’s Wall Street Journal, written by the state’s Comptroller of Public Accounts, points out some worrisome signs.

As the chief financial officer of the nation’s second-largest state, even I have found it hard to get a handle on how much governments are spending, and how much debt they’re taking on. Every level of government is piling up incredible bills. And they’re coming due, whether we like it or not. Even in low-tax Texas, property taxes have risen three times faster than the inflation rate and four times faster than our population growth since 1992. Our local governments, meanwhile, more than doubled their debt load in the last decade, to more than $7,500 in debt for every man, woman and child in the state. In Houston alone, city-employee pension plans are facing an unfunded liability of $2.4 billion. But too many taxpayers aren’t given the information they need to make informed decisions when they vote debt issues. Recently I spent several months holding about 40 town-hall meetings with Texans across our state. Each time, I asked the attendees if they could tell me how much debt their local governments are carrying. Not a single person in a single town had this information.

In other words, taxpayers need to be eternally vigilant, regardless of where they live. Otherwise the corrupt rectangle of politicians, bureaucrats, lobbyists, and interest groups will figure out hidden ways of using the political process to obtain unearned wealth.

P.S. The second-most-viewed post on this blog is this joke about Texas, California, and a coyote, so it must be at least somewhat amusing. If you want some Texas-specific humor, this police exam is amusing and you’ll enjoy this joke about the difference between Texans, liberals and conservatives. And if you want California-specific humor, this Chuck Asay cartoon hits the nail on the head.

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Like most people, I’m a sucker for a heartwarming story around the holidays.

Sometimes, you get that nice feeling when good things happen to good people, like you find at the end of a classic movie like “It’s a Wonderful Life.”

But since I’m a bit of a curmudgeon, I also feel all warm and fuzzy when bad things happen to bad people.

That’s why I always smile when I read stories about taxpayers moving across borders, thus preventing greedy tax-hiking politicians from collecting more revenue.

“Where’s our tax revenue?!?”

I’m glad when that happens to French politicians. I’m glad when it happens to Italian politicians. I’m glad when it happens to Illinois politicians. And British politicians. And Spanish politicians. And Maryland politicians. I could continue, but I think you get the point.

I’m even glad when it happens to the politicians in Washington.

I smile because I envision the moment when some budget geek tells these sleazy politicians that projected revenues aren’t materializing and they don’t have more money to spend.

So I wish I could be a fly on the wall when this moment of truth happens to California politicians. They convinced voters in the state to enact Prop 30, a huge tax increase targeting those evil, awful, bad rich people.

Governor Brown and his fellow kleptocrats in Sacramento doubtlessly are salivating at the thought of more money to waste.

But notwithstanding a satirical suggestion from Walter Williams, there aren’t guard towers and barbed-wire fences surrounding the state. Productive people can leave, and that’s happening every day. And they take their taxable income with them.

Usually in ways that don’t attract attention. But sometimes a bunch of them leave at the same times, and that is newsworthy. Here’s an example of that happening, as reported by the San Francisco Chronicle.

Chevron Corp. will move up to 800 jobs – about a quarter of its current headquarters staff – from the Bay Area to Houston over the next two years but will remain based in San Ramon, the oil company told employees Thursday. …The company already employs far more people in Houston – about 9,000 full-time employees and contractors – than it does in San Ramon.

We don’t know a lot of details, but these were positions at the company’s headquarters and they were “technical positions dealing with information and advanced energy technologies…tied to Chevron’s worldwide oil exploration and production business.”

Let’s assume these highly skilled employees earn an average of $250,000. I imagine that’s a low-ball estimate, but this is just for purposes of a thought experiment. Now multiply that average salary by 800 workers and you get $200 million of income.

And every penny of that $200 million no longer will be subject to tax by the kleptocrats in the state’s capital.

In other words, we’re seeing the Laffer Curve in action.

Politicians can raise tax rates all day long, but that doesn’t automatically translate into more tax revenue. Politicians keep forgetting that taxable income is not a fixed variable.

What’s happening in a big way with Chevron is happening in small ways every single day with investors, entrepreneurs, small business owners, and other “rich’ people.

That’s good for the people escaping. And it also will warm my heart when California’s despicable politicians discover next year that there’s an “unexpected” revenue shortfall.

P.S. It’s just an anecdote that the Chevron jobs are going to Texas. But when you add together a bunch of anecdotes, you get data. And according to the data, Texas is kicking the you-know-what out of California. Maybe there’s a lesson to be learned?

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Over the years, I’ve shared some outrageous examples of overpaid bureaucrats.

Hopefully we’re all disgusted when insiders rig the system to rip off taxpayers. And I suspect you’re not surprised to see that the worst example on that list comes from California, which is in a race with Illinois to see which state can become the Greece of America.

Well, the Golden State has a new über-bureaucrat. Here are some of the jaw-dropping details from a Bloomberg report.

The numbers are even larger in California, where a state psychiatrist was paid $822,000, a highway patrol officer collected $484,000 in pay and pension benefits and 17 employees got checks of more than $200,000 for unused vacation and leave. The best-paid staff in other states earned far less for the same work, according to the data.

Wow, $822,000 for a state psychiatrist. Not bad for government work. So what is Governor Jerry Brown doing to fix the mess? As you might expect, he’s part of the problem.

…the state’s highest-paid employees make far more than comparable workers elsewhere in almost all job and wage categories, from public safety to health care, base pay to overtime. …California has set a pattern of lax management, inefficient operations and out-of-control costs. …In California, Governor Jerry Brown hasn’t curbed overtime expenses that lead the 12 largest states or limited payments for accumulated vacation time that allowed one employee to collect $609,000 at retirement in 2011. …Last year, Brown waived a cap on accrued leave for prison guards while granting them additional paid days off. California’s liability for the unused leave of its state workers has more than doubled in eight years, to $3.9 billion in 2011, from $1.4 billion in 2003, according to the state’s annual financial reports. …The per-worker costs of delivering services in California vastly exceed those even in New York, New Jersey, Illinois and Ohio.

Actually, it’s not just that he’s part of the problem. He’s making things worse, having seduced voters into approving a ballot measure to dramatically increase the tax burden on the upper-income taxpayers.

I suppose the silver lining to that dark cloud is that many bureaucrats now rank as part of the top 1 percent, so they’ll have to recycle some of their loot back to the political vultures in Sacramento.

Cartoon California Promised Land

But the biggest impact of the tax hike – as shown in the Ramirez cartoon – will be to accelerate the shift of entrepreneurs, investors, and small business owners to states that don’t steal as much. Indeed, a study from the Manhattan Institute looks at the exodus to lower-tax states.

The data also reveal the motives that drive individuals and businesses to leave California. One of these, of course, is work. …Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs. Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.

Yet another example of why tax competition is such an important force for economic liberalization. It punishes governments that are too greedy and gives taxpayers a chance to protect their property from the looter class.

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I periodically mock the crazy statists of California. The state is almost surely doomed to suffer a Greek-style fiscal chaos. The only unknown is whether Illinois will beat the Golden State into default.

Governor Jerry Brown’s new “taxpayer restraint” fence?

The politicians in Sacramento impose very high taxes to fund a bloated bureaucracy that oversees a bunch of politically correct nonsense.

But the scam may be coming to an end. Margaret Thatcher famously warned that the problem with socialism is that sooner or later you run out of other people’s money.

Well, that’s happening sooner in California because more and more people are deciding to leave the state.

Yet the moochers and looters than run the state aren’t learning the right lesson. They think that successful people are a pinata that can be endlessly beaten in the search for more revenue.

But there will come a point when they realize that the geese with the golden eggs are flying away. What will they do when reality slaps them in the face?

In a just and good world, they will realize they screwed up and reverse the horrible policies that crippled California. They will reduce the burden of government spending and replace the state’s class-warfare tax system with a simple and fair flat tax.

Unfortunately, we don’t live in that world. I’m worried that politicians in Sacramento will read the latest column by Walter Williams and not realize he’s being satirical. Walter starts out with a good description of what’s happening in the state.

California was once the land of opportunity, but it is going down the tubes. …people are already leaving California in great numbers. …roughly 225,000 residents leave California each year — and have done so for the past 10 years. They take their money with them. …California’s out-migration results in large shares of income going to other states, mostly to Nevada ($5.67 billion), Arizona ($4.96 billion), Texas ($4.07 billion) and Oregon ($3.85 billion). That’s the problem. California politicians can fleece people in 2012, but there’s no guarantee that they can do the same in 2013 and later years; people can leave.

He then speculates, tongue in cheek, about what sort of totalitarian measures a state government might take to prevent taxpayers from escaping.

…there might be a way for California politicians to solve their fiscal mess. They can simply stop wealthy people from leaving the state or, alternatively, like some Third World nations, set limits on the amount of assets a resident can take out of the state. …California [could] set up border controls to stop people, as East Germans did at Checkpoint Charlie, before they cross the state line… What California Attorney General Kamala D. Harris might do is sue Nevada, Arizona, Texas and Oregon in the federal courts for enticing, through lower taxes and less onerous regulations, wealthy California taxpayers.

Walter is joking, of course, but keep in mind that the federal government already has ventured into this territory with Orwellian laws such as “FATCA” that create a global reach for bad American tax policy.

And does anyone think the kleptocrats that run California will do the right thing so long as they have any hope that some new expansion of government power will prop up the welfare state for a few more years?

I’m predicting that California will continue its relative decline, particularly when compared to zero-income-tax states like Texas, followed by a nightmare scenario as the special interests groups and their political lackeys look for some way of prolonging the scam.

P.S. Here’s some anti-California humor, including a cartoon that’s very relevant for the upcoming tax-hike referendum, an amusing joke feature Texas and a coyote, a Humpty Dumpty cartoon, a photo that shows the California bureaucracy in action, and a cartoon featuring archaeologists from the future.

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I’ve almost exhausted my interest in California’s suicidal fiscal policy. How many times, after all, can you write about politicians over-taxing and over-spending to the point of economic ruin?

But everyone has a cross to bear in life, and (if you allow me to mix my metaphors) griping about bloated government is my Sisyphean task.

So here’s a good cartoon about the bankruptcy of Stockton, California. I assume the California egg is supposed to be Governor Brown, but that’s not important. The obvious lesson is that the entire state will follow Stockton into collapse unless there’s a dramatic shift in policy.

As explained in this video, the main problem with state and local governments such as California and Stockton is that there are too many bureaucrats and they are paid too much (this cartoon makes the same point in a more amusing fashion).

But to be more specific, what’s killing them are the promises for retiree pensions and health care.

Interestingly, the federal government also is heading toward a fiscal cliff because of promises to spend money on retirees, but the nitwits in Washington have created entitlements for the entire population and not just for a privileged class of bureaucrats.

So the moral of the story is that as goes Stockton, so goes California. And as goes Greece, so goes America.

P.S. You can see some other cartoons from Lisa Benson here, here, herehere, and here.

P.P.S. Here’s a great Chuck Asay cartoon about California.

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Even though Chuck Asay is one of my favorite cartoonists (see herehereherehere, and here), I was not a big fan of one of his recent two-frame cartoons.

But he has more than made up for that slight transgression with this new gem.

I’m biased, of course, since I’ve already written about California being the Greece of America, but there’s plenty of evidence to justify Asay’s cartoon.

It’s hard to see how a state survives, in the long run, with such a burdensome government. While the cartoon is designed to be funny, it also make a valid point since the Golden State is copying the mistakes that are causing Greece to collapse.

That being said, California can be saved. I already mentioned this morning that voters in San Diego and San Jose voted overwhelmingly to trim the excessive benefits promised to government bureaucrats. But I also should have mentioned that California voters rejected a statewide referendum to boost tobacco taxes.

But the real test will be this November, when voters will be asked whether to vote for a huge income tax increase so that Governor Jerry Brown and the crowd in Sacramento can keep the gravy train rolling along for a few more years.

If voters resist the Washington-Monument-Syndrome demagoguery of the political elite and reject the class-warfare tax hike, then it’s possible that lawmakers will finally do the right thing and reduce the size and scope of California’s government.

I don’t think there’s any chance that California will become another Texas. But there’s a greater-than-zero chance that the state can pull itself back from the Grecian Abyss.

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Since I’m a policy wonk and not a political prognosticator, I’m not sure why people keep asking me what will happen in the November elections. But since I got lucky with my 2010 predictions, I may as well throw in my two cents.

The election is now exactly five months away, so here’s my first cut at what will happen.

At this point, I am predicting an Obama victory, albeit by a much narrower margin than in 2008.

Given the weak economy and unpopularity of Obamacare, one might think Romney should be the favorite. However, the establishment media is completely in the tank for Obama and Romney is not exactly the strongest candidate, and I think those factors will tip the scales in November.

That being said, Obama has dropped from being a 60 percent-plus favorite on Intrade to just a 52.3 percent favorite in recent weeks, so GOP partisans have reasons to be hopeful.

Since all I care about is policy, I confess I’m not sure whether to be happy about my prediction. It all boils down to whether the “Richard Nixon Disinfectant Rule” applies to Romney. As of right now, we don’t know the answer. Here’s what I told ABC News earlier this week.

“The negative spin is that he’s said all these things to basically get past a conservative-leaning Republican Party electorate and that he’s really the Massachusetts moderate that some of his opponents tried to make him out to be,” said Dan Mitchell, a Cato economist… The flip side, Mitchell said, is that if Romney does stick to his promises to conservatives, they’ll be pleased when he gives support to Paul Ryan’s budget, takes steps to lower the spending-to-GDP ratio significantly, and offers states flexibility on spending Medicaid money.

We’ll have plenty of time between today and November 6 to analyze the presidential election, so let’s leave the national stage and take a look at what happened yesterday in Wisconsin and California.

We’ll start with California, because there were two very important – but largely overlooked – votes in San Diego and San Jose about curtailing lavish pensions for bureaucrats. The results were shocking, particularly since California is a left-wing state. Here’s part of the AP report.

Voters in two major California cities overwhelmingly approved cuts to retirement benefits for city workers in what supporters said was a mandate that may lead to similar ballot initiatives in other states and cities that are struggling with mounting pension obligations. Supporters had a simple message to voters in San Diego and San Jose: Pensions for city workers are unaffordable and more generous than many private companies offer… In San Diego, 66 percent voted in favor of Proposition B, while 34 percent were opposed. Nearly 97 percent of precincts were tallied by early Wednesday. The landslide was even bigger in San Jose, the nation’s 10th-largest city. With all precincts counted, 70 percent were in favor of Measure B and 30 percent were opposed.

Since I’ve written repeatedly about excessive compensation for government employees, these results are encouraging. Perhaps the gravy train has finally been derailed

Yesterday’s big election, though, was in Wisconsin. Republicans took control of the state in 2010 and enacted laws to restrain the power of union bureaucracies, which led to a counterattack by the left. First, there was a recall effort against Republicans in the State Senate and that failed. Then there was a recall against one of the GOP judges on the state’s Supreme Court, and that failed.

The climactic battle yesterday was to recall Governor Scott Walker. So how did that turn out? Let’s enjoy these excerpts from the Washington Post.

Wisconsin Gov. Scott Walker won a vote to keep his job on Tuesday, surviving a recall effort that turned the Republican into a conservative icon…That made Walker the first governor in U.S. history to survive a recall election; two others had failed. …the night provided a huge boost for Walker — as well as Republicans in Washington and state capitals who have embraced the same energetic, austere brand of fiscal conservatism as a solution for recession and debt. In a state known for a strong progressive tradition, Walker defended his policies against the full force of the labor movement and the modern left. And he won, again.

By the way, the final result in the Badger State was 53 percent-46 percent and I predicted 54 percent-46 percent, so I somewhat atoned for my awful guess on the Iowa caucuses.

P.S. This cartoon accurately shows what was at stake in Wisconsin.

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I’ve explained before that “high-speed rail” is a boondoggle, and I’ve also posted a thorough presentation on the topic from the folks at Reason about this issue.

But some politicians can’t resist throwing good money after bad on these money-losing schemes. The latest example is from the People’s Republic of California, where Governor Jerry Brown is acting as if he wants the state to become a basket case.

Here are some passages from the Wall Street Journal’s editorial on the topic.

The good news in this debacle is that the state’s fiscal woes will make it nearly impossible to complete Governor Jerry Brown’s runaway high-speed rail train. The bad news is that the Governor is going to try anyway. Transportation experts warn that the 500-mile bullet train from San Francisco to Los Angeles could cost more than $100 billion, though the Governor pegs the price at a mere $68 billion. The state has $12.3 billion in pocket, $9 billion from the state and $3.3 billion from the feds, but Mr. Brown hasn’t a clue where he’ll get the rest. …In 2008 voters approved $9 billion in bonds for construction under the pretense that the train would cost only $33 billion and be financed primarily by the federal government and private enterprise. Investors, however, won’t put up any money because the rail authority’s business plans are too risky. Rail companies have refused to operate the train without a revenue guarantee, which the ballot initiative prohibits. Even contractors are declining to bid on the project because they’re worried they won’t get paid. Mr. Brown is hoping that Washington will pony up more than $50 billion, but the feds have committed only $3.3 billion so far—and Republicans intend to claw it back if they take the Senate and White House this fall. If that happens, the state won’t have enough money to complete its first 130-mile segment in the lightly populated Central Valley, which in any event wouldn’t be operable since the state can’t afford to electrify the tracks. …Mr. Brown and the White House are betting that the state will be in far too deep when the money runs out to abandon this mission on Camino Unreal. The Governor also figures that the $100 billion bill will seem smaller spread out over 30 years. What’s an extra $3 billion a year when the state’s already $16 billion in the hole?

The uncharitable part of me is thinking “Good, these morons are getting exactly what they deserve since voters were foolish enough to approve the 2008 referendum.”

But even though I think there is a value in having bad examples (whether cities or countries), it is tragic to see a beautiful state destroyed by reckless politicians and their big-government schemes.

I wrote that year that the last job creator to leave California should make sure to turn off the lights. I doubt that will be necessary since the electrical system probably will have failed by that time.

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President Obama’s fiscal policy is a dismal mixture. On spending, he wants a European-style welfare state. On taxes, he is fixated on class-warfare tax policy.

If we want to know the consequences of that approach, we can look at the ongoing collapse of Greece. Or, if we don’t like overseas examples, we can look at California.

If the (formerly) Golden State is any example, it turns out that having high tax rates doesn’t necessarily translate into high tax revenues. Here’s a blurb from an editorial in today’s Wall Street Journal.

California Controller John Chiang reported last week that April tax collections were a gigantic 20.2%, or $2.44 billion, below 2012-13 budget projections. …Among the biggest surprises is a 21.5% or nearly $2 billion decline in personal income tax payments from what Governor Jerry Brown had anticipated. This reinforces the point that when states rely too heavily on the top 1% of taxpayers to pay the bills, fiscal policy is a roller coaster ride. California is suffering this tax drought even as most other states enjoy a revenue rebound. State tax collections were up nationally by 8.9% last year, according to the Census Bureau, and this year revenues are up by double digits in many states. The state comptroller reports that Texas is enjoying 10.9% growth in its sales taxes (it has no income tax), while California can’t seem to keep up despite one of the highest tax rates in the land.

The WSJ editorial suggests a supply-side response, but you won’t be surprised to learn that the state’s kleptomaniac governor is pushing an Obama-style soak-the-rich tax hike.

This would seem to suggest that California should try cutting tax rates to keep more people and business in the state, but Sacramento is intent on raising them again. Governor Brown and the public-employee unions are sponsoring a ballot initiative in November to raise the state sales tax by a quarter point to 7.5% and to raise the top marginal income-tax rate to 13.3% from 10.3%. This will make the state even more reliant on the fickle revenue streams provided by the rich. Meanwhile, an analysis by Joseph Vranich, who studies migration of businesses from one state to another, finds that since 2009 the flight of businesses out of California “has increased fivefold due to high taxes and regulatory costs.”

I’ll be very curious to see what happens this November when the people of California vote in the referendum. Will they be like the morons in Oregon, who approved a class-warfare tax hike? Or will they be like the voters of Switzerland and reject class warfare?

Sadly, I suspect Oregon will be their role model – even though that decision hurt the Beaver State’s economy.

But while voters can impose higher taxes, they can’t repeal the laws of economics. So if California voters do the wrong thing, they will learn a hard lesson about the Laffer Curve.

And then, as this cartoon demonstrates, they’ll learn the ultimate lesson about not biting the hand that you mooch from.

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I’ve complained about food stamp abuse on several occasions, including people using them to buy luxury coffee at Starbucks and to buy steaks and lobster. I’ve groused about college kids scamming the program and the Obama Administration rewarding states that sign up more food stamp recipients.

I’ve also been outraged by schemes to make it easier to use food stamps at fast food restaurants, and I’ve criticized New York City for giving food stamps to newly released prisoners and running foreign-language ads encouraging more people to sign up for the program.

But we now have a winner for the strangest story of food stamp abuse. Here are the distasteful details from a Fox News report.

Nadya “Octomom” Suleman is on food stamps. …California offers $2,000 a month food assistance to large families earning less than $119,000 a year. Suleman has 14 children after undergoing repeated in vitro fertilizations. She is famous for having octuplets after she already had six children.

I’m not sure what gets me most agitated about this story.

  • Should I be upset that the state of California pays $24,000 per year to help subsidize people who have children they can’t afford?
  • Should I be upset that the state of California is giving handouts to families that make more than $100,000 per year and can afford to feed themselves?
  • Should I be upset that I probably helped pay for the expensive fertilization procedures this single mother utilized (I’m just guessing, but I would be shocked if taxpayers didn’t pick up the tab)?

I would conclude by saying this woman is in desperate need of counseling, but I’m sure taxpayers would get stuck with the bill for that as well.

This is one of the reasons why I support the federalist approach to welfare reform. If we shift all redistribution programs back to the states, we’ll generally get better policy.

And when leftist states such as California continue to finance bad behavior, at least I’ll know that I’m not being coerced to subsidize foolishness.

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I’ve recently become a fan of Lisa Benson’s cartoons (see here, here and here), and this may be her best piece of work.

My only quibble is that there should be an elephant somewhere on the wagon since Schwarzenegger also was a big spender.

I’m also a big fan of the work of Michael Ramirez work (see here, hereherehere,here, and here), and he has a new cartoon about Paul Ryan’s plan for Medicare reform.

What makes this cartoon especially biting is that Ryan’s current plan isn’t quite as good as the one he proposed last year, but that isn’t stopping demagogues from complaining.

Which raises a good issue. If you’re going to be viciously demagogued regardless of whether you solve 5 percent of a problem or 100 percent of a problem, why not go all the way?

Maybe I’ll call this “Mitchell’s Don’t-Cross-a-Canyon-in-Two-Leaps Principle,” to complement “Mitchell’s Law” and “Mitchell’s Golden Rule.”

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I’ve written before about whether California is the Greece of America, in part because of crazy policies such as overpaid bureaucrats and expensive forms of political correctness,

And we all know that California has one of the nation’s greediest governments, imposing confiscatory tax rates on a shrinking pool of productive citizens.

So it is hardly surprising that the Golden State is falling behind, losing jobs and investment to more sensible states such as Texas.

But not everybody is learning the right lessons from California’s fiscal and economic mess.

There’s a group of crazies who want to increase the top tax rate by five percentage points, an increase of about 50 percent. And they have made Kim Kardashian the poster child for their proposed ballot initiative.

I’m relatively clueless about popular culture, but even I’m aware that there is a group of people know as the Kardashian sisters. I don’t know who they are or what they do, but I gather they are famous in sort of the same way Paris Hilton was briefly famous.

And they have cashed in on their popularity, which may not reflect well on the tastes of the American people, but it’s not my job to tell other people how to spend their money.

But not everybody share this live-and-let-live attitude, which is why the pro-tax crowd in California produced this video.

I suppose I could criticize the petty dishonesty of the proponents, since they deliberately blurred of the difference between “tax rates” and “taxes paid.”

Or I could expose their economic illiteracy by pointing out that higher tax rates would accelerate the emigration of investors, entrepreneurs, small business owners, and other rich taxpayers to zero-tax states such as Nevada.

But I won’t do those things. Instead, like the Nevada Realtors Association and Arizona Business Relocation Department, I’m going to support this ballot initiative.

Not because I overdid the rum and eggnog at Christmas, but because it’s good to have negative role models, whether they are countries like Greece, cities such as Detroit, or states like California.

So here’s my challenge to the looters and moochers of the Golden State. Don’t just boost the top tax rate by five-percentage points. That’s not nearly enough. Go for a 20 percent top tax rate. Or 25 percent. After all, think of all the special interests that could use the money more than Ms. Kardashian.

And if somebody tells you that she will move to South Beach or Las Vegas, or that the other rich people will move to Texas, Wyoming, or Tennessee, just ignore them. Remember, it’s good intentions that count.

In closing, I apologize to the dwindling crowd of productive people in California. It’s rather unfortunate that you’re part of this statist experiment. But you know what they say about eggs and omelets.

By the way, here’s some humor about the Golden State, including a joke about the bloated bureaucracy and a comparison with Texas.

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Every so often (about 362 days per year), I come to the conclusion that government is a racket for the benefit of special interests.

Greece  would be an example. And if we limit ourselves to the United States, California is probably the poster child for a kleptocracy masquerading as a government.

Here are some absurd details, from a Bloomberg report, about bureaucrats ripping off taxpayers.

Manglicmot is one of 42 state nurses who each made more than $1 million in those six years, mostly by tapping overtime, according to payroll data compiled by Bloomberg News. Together, those nurses collected $47.5 million. In 2008, Manglicmot was paid $331,346, including $211,257 in overtime. The extra pay that allows some nurses to triple their regular compensation underscores a broader trend in California, where government workers are paid more than in other states for similar duties and civil-service job protections hamper efforts to close budget gaps. Governor Jerry Brown said this week that revenue will fall short of expectations, triggering $1 billion in cuts to school busing, libraries and care for children, the elderly and the disabled, among other programs. “California taxpayers should be outraged,” said Lanny Ebenstein, an economics lecturer at the University of California at Santa Barbara and president of the California Center for Public Policy, a research institution critical of public-sector compensation. …California is home to city managers whose compensation is higher than the governor’s, prison doctors who make more than counterparts elsewhere, Los Angeles firefighters who collect twice the national mean and state workers who reaped $1.7 billion more than their regular salaries last year, from overtime and unused vacation pay to physical-fitness incentives.

I can only imagine how horrible it would feel to be a California taxpayer, particularly since the story just cited is merely the tip of the iceberg.

This video from Reason TV is a good explanation of how bloated bureaucracy has helped to cause a deteriorating situation in the Golden State.

And here’s my video on the overall topic of overpaid bureaucrats.

Last but not least, don’t forget the video from the folks at Government Gone Wild.

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I’ve had several reasons to mock California in the past couple of years (see here, here, here, and here).

But I never thought state politicians would be crazy enough to impose harsh regulations on babysitting.

Filling out a time card for your babysitter sounds absurd, but that’s just the tip of the iceberg in a new law moving through the California state legislature. Here’s how a critic described some of the key provisions in a column for a local newspaper.

How will parents react when they find out they will be expected to provide workers’ compensation benefits, rest and meal breaks and paid vacation time for…babysitters? Dinner and a movie night may soon become much more complicated. Assembly Bill 889 (authored by Assemblyman Tom Ammiano, D-San Francisco, will require these protections for all “domestic employees,” including nannies, housekeepers and caregivers. The bill has already passed the Assembly and is quickly moving through the Senate with blanket support from the Democrat members that control both houses of the Legislature.

Parents might even need to hire two babysitters if they intend to be out of the house for more than a couple of hours, though I actually hope the author is wrong in this description of the legislation (surely they’re not this crazy!).

…household “employers” (aka “parents”) who hire a babysitter on a Friday night will be legally obligated to…provide a substitute caregiver every two hours to cover rest and meal breaks, in addition to workers’ compensation coverage, overtime pay, and a meticulously calculated timecard/paycheck. Failure to abide by any of these provisions may result in a legal cause of action against the employer including cumulative penalties, attorneys’ fees, legal costs and expenses associated with hiring expert witnesses.

I have no problem, however, believing that California politicians are creating a system designed to facilitate costly and absurd lawsuits. I’m sure the trial lawyers are getting a good return on their campaign contributions.

The only good news is that we can safely assume that there will be rampant non-compliance from parents and baby sitters. The bad news is that this legislation almost surely will have a deleterious impact on more permanent forms of care-giving, such as nannies and housekeepers. That will be especially unfortunate for lower-income people who tend to benefit from these types of jobs.

..the unreasonable costs and risks contained in this bill will discourage folks from hiring housekeepers, nannies and babysitters and increase the use of institutionalized care rather than allowing children, the sick or elderly to be cared for in their homes.

When the Golden State falls apart and goes bankrupt, this legislation (assuming it is approved) will be a good example of the failure of left-wing statism.

P.S. Since we are picking on California, here are a couple of posts that use humor to make fun of the folks on the left coast (here and here).

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Walter Williams has pointed out on many occasions that many government programs and initiatives exist primarily for the benefit of the bureaucracy, and he coined the phrase “poverty pimps” to describe the folks who get comfortable government jobs to operate programs that don’t help – and often hurt – disadvantaged populations.

We may need a new term, “diversity pimps,” to describe the people who get plush appointments to oversee the array of government-imposed racial and sexual preferences. Heather McDonald has a story at the City Journal that exposes how this absurd scam is undermining college education in California.

Even as UC campuses jettison entire degree programs and lose faculty to competing universities, one fiefdom has remained virtually sacrosanct: the diversity machine. Not only have diversity sinecures been protected from budget cuts, their numbers are actually growing. The University of California at San Diego, for example, is creating a new full-time “vice chancellor for equity, diversity, and inclusion.”

But what’s really remarkable is how this new office will be just one of many that exist to provide jobs for the diversity pimps.

This position would augment UC San Diego’s already massive diversity apparatus, which includes the Chancellor’s Diversity Office, the associate vice chancellor for faculty equity, the assistant vice chancellor for diversity, the faculty equity advisors, the graduate diversity coordinators, the staff diversity liaison, the undergraduate student diversity liaison, the graduate student diversity liaison, the chief diversity officer, the director of development for diversity initiatives, the Office of Academic Diversity and Equal Opportunity, the Committee on Gender Identity and Sexual Orientation Issues, the Committee on the Status of Women, the Campus Council on Climate, Culture and Inclusion, the Diversity Council, and the directors of the Cross-Cultural Center, the Lesbian Gay Bisexual Transgender Resource Center, and the Women’s Center.

Not surprisingly, since resources are finite, all this fluff is causing collateral damage.

UC San Diego is adding diversity fat even as it snuffs out substantive academic programs. In March, the Academic Senate decided that the school would no longer offer a master’s degree in electrical and computer engineering… At the same time, the body mandated a new campus-wide diversity requirement for graduation. …This week, in light of a possible cut of $650 million in state financing, the University of California’s regents will likely raise tuition rates to $12,192. Though tuition at UC will remain a bargain compared with what you would pay at private colleges, the regents won’t be meeting their responsibility to California’s taxpayers if they pass over in silence the useless diversity infrastructure that sucks money away from the university’s real function: teaching students about the world outside their own limited selves. California’s budget crisis could have had a silver lining if it had resulted in the dismantling of that infrastructure—but the power of the diversity complex makes such an outcome unthinkable.

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Let’s start in Washington, where USA Today reports that there are “at least 17,828 federal employees whose annualized salaries totaled $180,000 or more in September 2010.” That’s rather distressing news for taxpayers, but these excerpts from the story provide additional reason for us to be upset.

…their ranks soared from the 805 with annualized salaries of $180,000 or more in 2005. Nearly 90% held “excepted service” jobs, meaning they worked at agencies that set their own qualification requirements and aren’t subject to the appointment, pay and classification regulations that apply to other civil service posts. …Light said he was surprised the federal data showed that 598 SEC lawyers ranked second among the largest employee groups with the top annualized salaries. The financial industry regulator, widely criticized for its failure to detect and stop Ponzi scheme architect Bernard Madoff, “hasn’t been doing its job very well, and yet its lawyers come out on top. That’s a shock, don’t you think?” said Light. Given the national concern with fighting crime, he questioned why federal prosecutors didn’t top SEC lawyers in numbers of highest-salaried attorneys.

Keep in mind, by the way, that the article is examining salaries rather than total compensation. And since bureaucrats generally get benefits that are four times higher than their counterparts in the productive sector of the economy, the gap between the bureaucratic elite and the serfs who pay their salaries is even larger than these figures suggest.

But at least the overpaid federal bureaucrats are mostly doctors and lawyers, so there’s at least some argument for high levels of compensation. If you want to read something truly outrageous, let’s travel to Newport Beach, California, where the city’s lifeguards are bleeding taxpayers in an obscene fashion.

…the city’s full-time lifeguard force has finally come under scrutiny. Next week the city council will decide if cuts are needed to the full-time lifeguard force where last year the top earner received $211,000 in pay and benefits, including a $400 sun protection allowance. In 2010 all but one of the city’s full-time lifeguard staff had annual compensation packages worth over $120,000. Not bad pay for a lifeguard – but what makes these jobs most attractive is the generous retirements. These lifeguards can retire at age 50 with full medical benefits for life. One recently retired lifeguard, age 51, receives a government retirement of over $108,000 per year—for the rest of his life.

The examples in this post are especially egregious, but the key thing to keep in mind that compensation levels for bureaucrats (at all levels of government) are far too high. I’ve posted this video before, but I’ll embed it again for folks who want to see some of the key statistics to prove that the government workforce is too large and paid too much.

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I’ve already had a couple of blog posts commenting on how Texas is kicking California’s you-know-what. Being a fiscal policy person, I always point to California’s punitive state income tax as an example of bad policy and highlight the absence of any income tax in Texas to explain the success of that state.

But sometimes it’s just culture and attitude. Here’s a joke comparing the two states, but it’s based on something that actually happened in Texas.

CALIFORNIA: The Governor of  California is jogging with his dog along a nature trail. A coyote jumps  out, bites the Governor and attacks his dog.

1. The Governor starts to intervene, but reflects  upon the movie “Bambi” and then realizes he should stop; the coyote is  only doing what is natural.

2. He calls animal control. Animal Control  captures the coyote and bills the State $200 testing it for diseases and $500  for relocating it.

3. He calls a veterinarian. The vet collects  the dead dog and bills the State $200 for testing it for diseases.

4. The Governor goes to hospital and spends  $3,500 getting checked for diseases from the coyote and on getting his  bite wound bandaged.

5. The running trail gets shut down for  6 months while Fish & Game conducts a $100,000 survey to  make sure the area is free of dangerous animals.

6. The Governor spends $50,000 in state funds to  implement a “coyote awareness” program for residents of the area.

7. The State Legislature spends $2 million  to study how to better treat rabies and how to permanently  eradicate the  disease throughout the world.

8. The Governor’s security agent is  fired for not stopping the attack somehow and for letting the  Governor attempt to intervene.

9. Additional cost to State of California:  $75,000 to hire and train a new security agent with additional special  training re: the nature of coyotes.

10. PETA protests the coyote’s  relocation and files suit against the State.

TEXAS: The Governor of Texas is  jogging with his dog along a nature trail. A Coyote jumps out, bites  the Governor’s leather boot, and attacks his dog.

1. The Governor shoots the coyote with his State-issued  pistol and keeps jogging. The Governor has spent $0.50 on a .45 ACP  hollow
point cartridge.

2. The buzzards eat the dead coyote.

And that, boys and girls, is why California is  broke………..And, more importantly, why too much government  doesn’t work.

Addendum: Welcome Instapundit readers. A few people in the comments are looking for a response to Krugman’s attack on Texas. Kevin Williamson at National Review provides the answer.

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The mid-term elections were a rejection of President Obama’s big-government agenda, but those results don’t necessarily mean better policy. We should not forget, after all, that Democrats rammed through Obamacare even after losing the special election to replace Ted Kennedy in Massachusetts (much to my dismay, my prediction from last January was correct).

Similarly, GOP control of the House of Representatives does not automatically mean less government and more freedom. Heck, it doesn’t even guarantee that things won’t continue to move in the wrong direction. Here are five possible bad policies for 2011, most of which the Obama White House can implement by using executive power.

1. A back-door bailout of the states from the Federal Reserve – The new GOP Congress presumably wouldn’t be foolish enough to bail out profligate states such as California and Illinois, but that does not mean the battle is won. Ben Bernanke already has demonstrated that he is willing to curry favor with the White House by debasing the value of the dollar, so what’s to stop him from engineering a back-door bailout by having the Federal Reserve buy state bonds? The European Central Bank already is using this tactic to bail out Europe’s welfare states, so a precedent already exists for this type of misguided policy. To make matters worse, there’s nothing Congress can do – barring legislation that Obama presumably would veto – to stop the Fed from this awful policy.

2. A front-door bailout of Europe by the United States – Welfare states in Europe are teetering on the edge of insolvency. Decades of big government have crippled economic growth and generated mountains of debt. Ireland and Greece already have been bailed out, and Portugal and Spain are probably next on the list, to be followed by countries such as Italy and Belgium. So why should American taxpayers worry about European bailouts? The unfortunate answer is that American taxpayers will pick up a big chunk of the tab if the International Monetary Fund is involved. Indeed, this horse already has escaped the barn. The United States provides the largest amount of  subsidies to the International Monetary Fund, and the IMF took part in the bailouts of Greece and Ireland. The Senate did vote against having American taxpayers take part in the bailout of Greece, but that turned out to be a symbolic exercise. Sadly, that’s probably what we can expect if and when there are bailouts of the bigger European welfare states.

3. Republicans getting duped by Obama and supporting a VAT – The Wall Street Journal is reporting that the Obama Administration is contemplating a reduction in the corporate income tax. This sounds like a great idea, particularly since America’s punitive corporate tax rate is undermining competitiveness and hindering job creation. But what happens if Obama demands that Congress approve a value-added tax to “pay for” the lower corporate tax rate? This would be a terrible deal, sort of like a football team trading a great young quarterback for a 35-year old lineman. The VAT would give statists a money machine that they need to turn the United States into a French-style welfare state. This type of national sales tax would only be acceptable if the personal and corporate income taxes were abolished – and the Constitution was amended to make sure the federal government never again could tax what we earn and produce. But that’s not the deal Obama would offer. My fingers are crossed that Obama doesn’t offer to swap a lower corporate income tax for a VAT, particularly since we already know that some Republicans are susceptible to the VAT.

4. Regulatory imposition of global warming policy – This actually is an issue we needed to start worrying about before this year. The Obama Administration already is in the process of trying to use regulatory edicts to impose Kyoto-style restrictions on energy use, and 2011 may be a pivotal year for this issue. This issue is troubling because of the potential impact on economic growth, but it also represents an assault on the rule of law since the White House and the Environmental Protection Agency are engaging in regulatory overreach because they did not have enough support to get so-called climate change legislation through Congress. The new GOP majority presumably will try to use the “power of the purse” to limit the EPA’s power grab, and the outcome of that fight could have dramatic implications for job creation and competitiveness.

5. U.N. control of the Internet – The Federal Communications Commission just engaged in an unprecedented power grab as part of its “Net Neutrality” initiative, so we already have bad news for both Internet consumers and America’s telecommunications industry. But it may get worse. The bureaucrats at the United Nations, conspiring with autocratic governments, have created an Internet Governance Forum in hopes of grabbing power over the online world. This has caused considerable angst, leading Vint Cerf, one of inventors of the Internet (sorry, Al Gore) to warn: “We don’t believe governments should be allowed to grant themselves a monopoly on Internet governance. The current bottoms-up, open approach works — protecting users from vested interests and enabling rapid innovation. Let’s fight to keep it that way.” International bureaucracies are very skilled at incrementally increasing their authority, so this won’t be a one-year fight. Stopping this power grab will require persistent oversight and a willingness to reject compromises that inevitably give bureaucracies more power and simply set the stage for further demands.

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This blog repeatedly has chronicled the huge discrepancy between the gold-plated compensation for government employees and the meager salaries and benefits of people in the productive sector of the economy, including a video conclusively demonstrating that bureaucrats are overpaid.

This message is now resonating all across the nation. Even the New York Times, as shown by the excerpt below, now realizes that taxpayers are sick and tired of paying exorbitant taxes to finance excessive pay for the bureaucracy.

But public awareness is only a small step in the right direction. What really matters is public policy. Will the bureaucracy be downsized? Will salaries be frozen for several years? Will absurd pension plans be replaced by 401(k) systems? And what will happen to unaffordable health plans for government workers?

We’re going to see some interesting battles at the state and local level. One of the many great things about federalism is we get an opportunity to see some governments do the right thing and some do the wrong thing. And as we watch states like California descend into bankruptcy, this teaches everyone about the policies that should be avoided.

But the long-overdue day of reckoning won’t happen if Obama and the other politicians figure out how to bail out reckless state and local governments. That’s already happened once, since funneling federal money to the states was one of main goals of Obama’s failed stimulus.

But sending more money to the states would be akin to providing an alcoholic with a case of booze. If House Republicans have any brains, they will make sure taxpayers in places like Texas don’t pay more to subsidize politicians and special interests in places such as Illinois.

Cross your fingers that they hold firm. In the meantime, let’s enjoy the change in the public mood. Here are a few passages from yesterday’s story in the New York Times.

Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy. In California, New York, Michigan and New Jersey, states where public unions wield much power and the culture historically tends to be pro-labor, even longtime liberal political leaders have demanded concessions — wage freezes, benefit cuts and tougher work rules. …a growing cadre of political leaders and municipal finance experts argue that much of the edifice of municipal and state finance is jury-rigged and, without new revenue, perhaps unsustainable. Too many political leaders, they argue, acted too irresponsibly, failing to either raise taxes or cut spending. A brutal reckoning awaits, they say. …Fred Siegel, a historian at the conservative-leaning Manhattan Institute, has written of the “New Tammany Hall,” which he describes as the incestuous alliance between public officials and labor. “Public unions have had no natural adversary; they give politicians political support and get good contracts back,” Mr. Siegel said. “It’s uniquely dysfunctional.” …In California, pension costs now crowd out spending for parks, public schools and state universities; in Illinois, spiraling pension costs threaten the state with insolvency. And taxpayer resentment simmers.

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Here are a few predictions for next year. It will be hot in Dallas in July, it will be cold in Stockholm in February, and Governor Jerry Brown of California will ask Uncle Sam for some sort of bailout.

I’m actually not sure about the first two predictions, but I think the last one is as close to a sure thing as you can get. Sven Larson is one of America’s top experts on state fiscal issues (his blog is an excellent resource for people who want to keep informed about the shenanigans of governors and state legislatures), and here’s his assessment of the mess in California.

California state spending has outgrown the state’s tax base by 1.3 percentage points annually for 25 years. Simple arithmetic dictates that in lieu of constant tax increases, this perpetuates a deficit. From 1985 to 2009 state GDP in California grew by 5.5 percent per year, on average (not adjusted for inflation). Annual growth in state spending was 6.8 percent, on average. Three spending categories have dominated this spending spree: public schools, cash assistance and Medicaid. Making up half of state spending, they are outlets for traditional redistributive welfare state policy. …Of the three aforementioned spending categories, two have grown faster than state GDP, i.e., the tax base, throughout the past quarter-century: • Public school spending grew at 6.5 percent per year on average, one full percent faster than state GDP • Medicaid grew at 10.7 percent per year on average, approximately twice the rate of state GDP.

In other words, California is in a fiscal mess because spending has grown too rapidly. It’s unclear why taxpayers in other states should be ripped off so that Golden State politicians can maintain an unsustainable vote-buying racket – particularly when the state goes out of its way to punish economic growth and discourage job creation.

To make matters worse, bailouts (or even the expectation of bailouts) send a terrible signal. Matt Mitchell (no relation) of the Mercatus Center looked at precisely this issue and concluded that state politicians would be even more profligate if they got any indication that they could shift the tax burden to people in other states. He even found an interesting study showing how sub-national governments in Germany responded to this kind of perverse incentive structure. Here’s an excerpt from that research.

States with a softer budget constraint [i.e., greater expectation that the German national government will bail them out], have higher deficits and debts and receive more bailout funds. …The larger the expectation of a bailout, the higher the amount spent in a number of spending categories, and special interests are most likely to benefit from this additional spending. We also find that bailout expectations lead to less efficient state government service provision.

By the way, I don’t want to imply that this is solely a California issue. There are several states that have taxed and spent themselves into fiscal ditches. Indeed, it’s quite likely that Illinois may be the first state to experience a fiscal collapse.

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