Over on Calculated Risk, Rob Dawg wrote:22 of the last 23 years California sent more to the other 49 than they got. Is it any surprise that running a deficit for a generation becomes a problem? Tell ya what. Zero out the accumulated funding imbalance, call it even and let us go our own way. What? The other 49 cannot afford to write a check that large? Fine, then we are all in this together. Sit down, shut up, hang on and get ready to write a check.Barry and Timmy are getting ready to do just that. California politicians know this, which is why they are refusing to make the necessary hard choices. This leads to a moral hazard: Why should other states keep their financial houses in order when they know Uncle Sam is ready to bail them out? It seems rather selfish of California politicians to demand that people working low-wage jobs in places like Maine and Georgia pay more to make sure that California state workers continue to receive their very generous pension benefits.
Getting to Rob's first sentence, this was a frequent refrain from Californians during the boom times. Many Californians groused that they were paying more into the federal treasury than they were getting back. So let's peel back the layers a bit and analyze this. Here are some facts:
- California residents pay the very same federal tax rate as those of us in the other 49 states.
- Well, not quite. Middle Americans don't get the fat subsidies that Californians get for "owning" a house. The fact is, the rest of us are subsidizing California home owners to the tune of billions of dollars every year.
- California incomes tend to be inflated by a series of manias (1) (2) that originate there and then go on to wreak havoc on other parts of the country. Like New York, fat corporate profits originating from these manias are responsible for a large chunk of the federal revenue.
Next time you read comments from Californians about how they're the "8th largest economy," "the other 49 states can't survive without us," "we should secede and become our own country," (blah blah blah) keep in mind that the rest of us have been subsidizing their illogical behavior for decades. For the good of the country perhaps it's time that we set California free to pursue its own destiny.
Update: Howdy, Chronicle readers!
16 comments:
Are there any estimates as to how much of those taxes from California are paid by actual American citizens? I'm betting the numbers don't look so good then.
I ain't going there, Michael! Immigration issues are the same here.
Where did you find that picture of Rob in his natural habitat? ;-)
I think you are mistaking what the morons in the california legislature say in their public statements, with the opinion of california citizens. After all the legislature has near all time low approval ratings, and has for most of the past decade. I live in CA, and I cringe every time I hear them make a statement like that. We all contribute to the federal tax base.
"Taxes are the price we pay for a civilized society". We actually want the money spent on that, not so people can stay on welfare forever. Not so govt administrators and prison psychologists can get a 250K a year paycheck, and there are hundreds of them (see ca personnel listings). You dont get back every dollar you pay in taxes, you cant, its a false on its face. The legislature here needs to stop pointing fingers, and stop f'ing around, and get serious about fixing the systemic problems with the states spending. The sane majority in the state are done with their bs game playing and kicking the ball down the road.
Is anyone else getting bailout fatigue?
Lou, the mentality of "paying more than we receive" is a result of people thinking that the federal government is their rich mommy & daddy. What is being put into Obama's stimulus package is a great example of this problem.
If the federal government would focus on defense and enforcement of laws, and leave the rest to the states (as specified in the Constitution) we would not be having this problem.
Joe the Plumber had it half right. He was right to fear that Obama was going to redistribute the wealth. He should have also realized that this redistribution has been going on for a long time.
Lou, the balance of payments issue already accounts for all those factors you mentioned.
Start here: http://www.calinst.org/pubs/balrpt02.pdf
Rob, the California Institute for Federal Policy Research has only one goal: Securing as much pork and federal gravy for California as possible. All states have such "institutes" (chortle), and they're all naturally conditioned to massage the numbers.
Another thing: The net beneficiaries are primarily poor states with low populations that don't have a rich tax base, and a handful of federal facilities can throw the numbers out of whack. For example, New Mexico is the #1 recipient of federal money, but driving through the state you'd never know it. New Mexico is a large, poor state with a comparatively small population. But it also has Sandia National Labs and Los Alamos, two huge facilities that receive billions in funding.
Look at Alaska, a huge state with a very small population. The money they "get" from the feds is primarily defense related. Lots of military bases up there. Most of the money goes to pay for these bases.
The states that are net contributors are, not surprisingly, the states that have industry and large corporations and lots of wealthy people to tax. Wall Street fatcats live in New Jersey and Connecticut. Guess which states pay the most?
It's very risky to play the "we pay X dollars and should always receive X dollars back in federal pork" game. You never know what might happen. Could be a major earthquake strikes the Bay Area and California congresswads request $200 billion for reconstruction. Or maybe the state government is incapable of balancing their budget and demand $50 billion from the rest of the country so they can continue paying their exorbitant pension plans. California would be SOL with such a plan.
Texas is a net loser, BTW. For every dollar we send, we get back 93 cents.
Speaking of Alaska, that picture was taken right before Sarah Palin clubbed those two critters to death and engaged in equestrian-themed sex with 6 eskimos.
Like New York, fat corporate profits originating from these manias are responsible for a large chunk of the federal revenue.
What about manias in oil and refined oil products and their producers, some of whom with corporate headquarters in TX?
Lou:
Having lived in the midwest, in Colorado, in Europe, and now in CA, I've come see that other Americans tend to see California the way the rest of the world sees America. Just sayin'
What about manias in oil and refined oil products and their producers, some of whom with corporate headquarters in TX?
Yes, but unlike Wall Street and the state of California, there's no talk of a Federal bailout of Texas or the oil industry.
New Mexico is a large, poor state with a comparatively small population. But it also has Sandia National Labs and Los Alamos, two huge facilities that receive billions in funding.
And so let's say $1.5 million is sent to Sandia Labs for... oh, say a photonuclearspectromodulation gadget. So that counts as $1.5 million net to New Mexico from the feds, right?
But then Sandia, which needs to buy the thing, turns around and buys it from you in Houston! Still, the Fed money flow shows that the money went to New Mexico because they have no way to know where the cash went after it landed in Sandia.
So for the $1.5 million shown on the Fed's books, the only guys in New Mexico who got anything out of the deal were the scientist placing the order ($60/hour) and the guy unloading it at the lab ($6/hour).
Lou, I'm willing to bet a lot of the money that shows up as a skew toward New Mexico is funneled through the Bureau of Indian Affairs. Almost 10% of their population is Native American. Compare that to Texas's 0.6%.
This comment near the end of the Scott Burns article made me cringe considering it was written in 2004:
"Does this mean the tax subsidy for expensive housing is causing coastal prices to rise? I doubt it. Other factors are at work."
Yeah, other factors were certainly at work...no income, no job, no assets, no brains, no problem!
Chris, it's been like a bad dream for many of us the past few years. So many of us saw this disaster years ago, yet no one in either party or any of the Wall Street hotshots saw this coming? Bullcrap.
Still no perp walks for the big players, and we're all waiting.
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