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Should California Be Broken Up?

By now, almost everyone agrees that California government is seriously dysfunctional. The state suffers from a grave fiscal crisis, extraordinarily high taxation (which, however, is still not enough to finance the state's exorbitant spending), overregulation, and numerous other problems. "Governator" Arnold Schwarzenegger has been no more able to curb these tendencies than his much-reviled Democratic predecessor, Gray Davis. Steven Greenhut suggests that California's problems are structural, not merely the result of bad decisions by individual politicians. He argues that the Golden State's people would be better off if it was broken up into three or four separate smaller states. The idea of partitioning California is not a new one; but it has never been more timely. While I don't necessarily endorse Greenhut's specific proposal, I do agree with the general argument that California's problems stem partly from its excessive size. With some 38 million people, California has about one-eighth of the nation's population.

Normally, the ability to "vote with your feet" is one of the strongest checks on dysfunctional state policies, a point John McGinnis and I discussed in this article. If a state government has poor economic policies, excessive taxes, or bad public services, taxpayers will tend to migrate elsewhere, putting pressure on the state to clean up its act. That, for example, is what happened with my own home state of Massachusetts when it lost population to southern and western states in the 1970s and early 80s. Even if the poorly performing state government doesn't shape up, at least migration will reduce the number of people who have to put up with it.

California has been largely insulated from foot-voting pressure because of its huge size, and the way in which it monopolizes most of the desirable parts of the US West Coast. Because of these geographic advantages, the cost of leaving California is often much higher than that of leaving most other states. As a result, Californians have had to put up with more abuse than most other state governments could get away with.

If California were divided into three or four smaller states, the cost of exit would be lower, and the new states would have strong incentives to compete with each other for people and businesses. Foot-voting would be a far more viable option. Of course we wouldn't want states that are too small to exploit economies of scale. However, each of the new states would probably have some 8 to 14 million people, more than such medium-size states as Virginia, Washington, Indiana, and Massachusetts, which few if any believe to be too small.

In recent years, the situation in California has gotten to be so bad that people really are starting to leave; the state has had more out-migration than in-migration for each of the last four years. But the numbers leaving are still small relative to the total population of the state.

Dividing California would accelerate this trend. Moreover, it is likely that at least one or two of the newly formed states would almost immediately have far better policies than today's California. Thus, millions of people would get to live under better policies without having to move at all.

There are various practical obstacles to a successful partition plan. For example, the new states would need to find a way to divide up California's enormous public debt. In addition, the Constitution forbids partitioning a state without its consent, which probably means that the current California legislature would have to agree to any partition. Despite these problems, the idea is at least worth considering.

Roger Schlafly (www):
The new states would still have an illegal alien problem.
7.14.2009 2:52am
Shawninphx (mail):
Interesting post, although I do question one part of it. Migration trends, re: your example of Mass., are often the result of aging rather than governmental policy. Here in AZ, you'll find plenty of Minnesotan's like myself. However, we are not driven out of the state because of its taxation, etc, but rather due to climate as you age (who wants to be shoveling snow in -30 degree weather as you grow older).

I would suggest that California's lack of migration is due to its moderate/temperate climate.

Additionally, dividing CA would not resolve any issue if real constitutional reform were not implemented. The real budgetary problem with CA, and here in AZ, is that people are allowed to vote for massive spending increases without directing where those funds should come from. It's easy to vote Yes on a ballot measure when you don't have to figure out where the funds will be raised. Unfortunately, even if CA were split up, I doubt that the new states will curtail the right of the electorate to use the initiative process. Unless that happens, you'll just have 3 or 4 CA's and no real change.
7.14.2009 3:00am
eyesay:
The problems now facing California can be solved simply by amending the constitution to allow a simple majority of both state houses to pass budgets and raise taxes, like most other states. Even requiring a 55% majority of both houses would do the trick.
7.14.2009 3:03am
Ilya Somin:
Migration trends, re: your example of Mass., are often the result of aging rather than governmental policy. Here in AZ, you'll find plenty of Minnesotan's like myself. However, we are not driven out of the state because of its taxation, etc, but rather due to climate as you age (who wants to be shoveling snow in -30 degree weather as you grow older).

Obviously, age and climate affect migration. However, the fact remains that Mass. and other states suffer far more out-migration when they have dysfunctional public policies than when they don't. MA is no longer losing people like they did in the 70s, even though the climate isn't getting any better, and people continue to age.


Additionally, dividing CA would not resolve any issue if real constitutional reform were not implemented. The real budgetary problem with CA, and here in AZ, is that people are allowed to vote for massive spending increases without directing where those funds should come from. It's easy to vote Yes on a ballot measure when you don't have to figure out where the funds will be raised. Unfortunately, even if CA were split up, I doubt that the new states will curtail the right of the electorate to use the initiative process. Unless that happens, you'll just have 3 or 4 CA's and no real change.


Despite these flaws, Arizona has a much better budget position and much lower taxes than CA. Indeed, Arizona has been attracting migrants in recent years. AS for the initiative process, state constitution-makers would have incentives to limit its spending powers if they knew that it would lead to massive foot-voting against the state if they didn't.
7.14.2009 3:06am
Ilya Somin:
The problems now facing California can be solved simply by amending the constitution to allow a simple majority of both state houses to pass budgets and raise taxes, like most other states. Even requiring a 55% majority of both houses would do the trick.

I doubt it's as simple as that. CA's taxes are already among the highest in the nation. So it's clear that the supermajority requirement is not a major obstacle to high taxes. Eliminating the supermajority requirement for spending would just exacerbate the state's already egregrious overspending problem.
7.14.2009 3:09am
tvk:
You also need to consider that partitioning California into 4 states leads to an addition 6 votes in the U.S. Senate and requires the consent of Congress. Given the demographics, it is entirely possible to gerrymander California in a way to ensure that all 8 Senators are Democrats in the short term. You really want that?
7.14.2009 3:16am
Tony Tutins (mail):

The problems now facing California can be solved simply by amending the constitution to allow a simple majority of both state houses to pass budgets and raise taxes, like most other states. Even requiring a 55% majority of both houses would do the trick.

The problems now facing California are caused by Democratic legislators and their public employee pressure groups who believe somehow that you can get blood from a stone. California Democrats cannot comprehend that budgets must be cut to match income; they believe by magic income can be raised to match budgets. They have heard we are in the midst of a recession; their reaction is that budgets must be increased to help the newly poor. To accomplish this, taxes must be raised on those folks who are still working.

Well, perhaps budget increases will help the newly poor -- increase in number.

The only saving grace now is that Republican legislators supply a check and balance on the will of the Democratic majority. If some spending is really vital, even a Republican with a heart of stone should agree. Take away the 2/3 majority requirement, and watch the fireworks. Even bleeding heart liberals will pack their minivans and flee to Arizona.
7.14.2009 3:18am
Mogden (mail):
Let's please secede from the union while we're at it.
7.14.2009 3:20am
studd beefpile:
All of these "one off" fixes might be good ideas, but they are politically impossible. For example, reforming the initiative system will never happen because it is the lifeblood of every politically organized faction in California. The only way to reform would be to upset everyone's apple carts at once, meaning a constitutional convention to draft a new constitution. The current one is almost 200 pages long and has been amended hundreds of times. It's a giant mess and the only way to move forward. I don't expect to much like what will come out of the process, but I can't imagine it would be much worse than what we have now.
7.14.2009 3:24am
DiversityHire:
This is the best first step the state could take toward fixing its problems. If California falls into the sea of debt it is rushing toward, the rest of the country will soon follow.

Divide and conquer is the best strategy when solutions to an existing problem are not known or are not readily workable. Division would improve the state's standing in congress, reduce the scale of government relative to the individual, reduce the regional differences that lead to stalemate, and acknowledge the fact that california really is at least four different states. (Plus it might reduce internecine warfare in the UC where sociologists @ UCSD think killing a whole campus or three is preferable to cross-the-boards cuts).

Are there precedents for subdividing an existing state?

Could there be a system of state insolvency that suspends a state from the union until it files a reorganization plan that (alleges) to resolve its structural problems?—like GM or Chrysler w/o the Italians or Labor unions :)

I think the division of the state longitudily along the 5, and then laterally from Point Arena to S. Lake Tahoe, and from Lompoc to Needles might be a good start. Starting with two city-states (bay area, greater LA) might work as well.

I don't think debt would be the biggest problem, that would be water...
7.14.2009 3:24am
Ilya Somin:
You also need to consider that partitioning California into 4 states leads to an addition 6 votes in the U.S. Senate and requires the consent of Congress. Given the demographics, it is entirely possible to gerrymander California in a way to ensure that all 8 Senators are Democrats in the short term. You really want that?

I doubt it. At the very least, there would be one red and one purple state created if the new settlement leads to the creatoin of 4 states. It's unlikely it could be pushed through without the support of substantial numbers of CA and national Republicans.
7.14.2009 3:24am
Leo Marvin (mail):
Ilya,

California has been largely insulated from foot-voting pressure because of its huge size, and the way in which it monopolizes most of the desirable parts of the US West Coast. Because of these geographic advantages, the cost of leaving California is often much higher than that of leaving most other states. As a result, Californians have had to put up with more abuse than most other state governments could get away with.

Sounds tautological. Essentially, aren't you saying California doesn't lose much population because Californians don't want to leave?
7.14.2009 3:34am
Leo Marvin (mail):
Anyway, if the legislature can't even muster the consensus to pass a budget, a scheme like this is a total non-starter. As you said above, partition would redound to the Republicans' political benefit. Californian Democrats aren't so miserable with the current arrangement that we'd cut off our political noses for a divorce.
7.14.2009 3:42am
William Woody (mail) (www):
So long as California is a beautiful place to live, and so long as people living elsewhere are convinced that California is a land of milk and honey, people will continue to move into California until a sort of equilibrium of overcrowding takes place.

It's simple physics.

Apparently, in order to reduce the influx of immigration to California, the State Assembly has decided to prematurely trash the place. Makes a certain perverse sense: the upside of living in California are the beautiful beaches and lovely weather. The downside is living in a Kafkaesque tax nightmare. We'll see if it works.
7.14.2009 3:47am
poo poo (mail) (www):
if this would make it easier to split up the 9th circuit, i'm all for it.
7.14.2009 3:48am
BRM:
Once CA is broken up, the Ninth Circuit can be effectively broken up as well.

I would think the northern half of the state would be happy to split off from the southern half.
7.14.2009 3:49am
DiversityHire:
And vice-versa, BRM. The right half from the left, too.
7.14.2009 3:53am
DiversityHire:

Californian Democrats aren't so miserable with the current arrangement that we'd cut off our political noses for a divorce.


"How does Senator Waxman sound to you? Do you think it's fair that those Bay Aryans have two US Senators and Los Angeles has none?!"
7.14.2009 3:56am
Ilya Somin:
Essentially, aren't you saying California doesn't lose much population because Californians don't want to leave?

No, I'm saying that CA isn't losing as much population as it otherwise would given its awful policies because the cost of exit is unusually high. Partitioning the state lowers the cost of exit (and enables some people to change policies at no cost at all).
7.14.2009 3:56am
Shawninphx (mail):
Obviously, age and climate affect migration. However, the fact remains that Mass. and other states suffer far more out-migration when they have dysfunctional public policies than when they don't. MA is no longer losing people like they did in the 70s, even though the climate isn't getting any better, and people continue to age.

This does not quite pan out. MA taxes have increased since the 1970's rather than decreased. So, if migration has slowed does that mean that people respond more positively when you raise taxes? Many books have been written to show that mass migrations usually occur when the number of elderly increase rapidly. Thus, people believe we are due for another massive shift in population as baby-boomers grow older.

Despite these flaws, Arizona has a much better budget position and much lower taxes than CA. Indeed, Arizona has been attracting migrants in recent years. AS for the initiative process, state constitution-makers would have incentives to limit its spending powers if they knew that it would lead to massive foot-voting against the state if they didn't.


Actually, AZ is not in a much better budget position. This even with a Republican Gov. and Rep. led legislature. If you do an oranges to oranges comparison AZ is just as bad off. We may not be in $24 billion plus area, but we we're also not as large as CA. Our budget woes are serious and our migration has not been young/middle aged people. Rather those migrating to the state have been retiree's (see Sun City, Glendale, El Mirage, etc. for age statistics and how their populations have ballooned and their so have their Medicare budgets). That's why AZ has been spending so much money on trying to attract YOUNGER citizens. We have a migration of young people out of the state while a rise in older people moving in.

Finally, 'state constitution-makers' are the people. The constitution of our state is not made up of politicos or party leaders. It's a coalition of common citizens. It's nice to think that people would curtail their own power and practices, but it's a daydream. Talk to any number of Arizonan's and they'll argue that our constitution should be expanded for more citizen input rather than reversed. While this is nice in theory I fear it could only lead to a CA style problem.

I'm all for citizen participation, but I also see where it can run out of control. Let CA be an example of that.
7.14.2009 3:56am
Drewp:
The senate seats issue would be a fun national political fight. I think one of the reasons this would never happen, besides the fact that "blue" coastal areas subsidize "red" ares in terms of benefit spending and subsidies, is trying to divide up water rights and access would be a nightmare, and likely straddle any divisions the right would envision for california.
7.14.2009 3:59am
Guest056 (mail):
Perhaps he doesn't find them interesting, but Ilya skips over the legality of this kind of proposal. It's unclear whether, without an amendment to the Constitution, this is possible. Certainly Texas v White suggests it would be up to the US government and that California in particular has no special say as to whether it itself gets split: the "preservation of the states and the maintenance of their governments are as much within the design and care of the Constitution as the preservation of the Union." Further, the relationship between a state and the union is "complete, perpetual, and indissoluble [...] there is no place for reconsideration, except through consent of the States."

Ilya gets the question exactly backward in saying that the Constitution forbids partitioning a state without its consent. Rather, as a consequence of the Civil War and Chase's majority opinion, the Constitution forbids partitioning a state without the involvement and oversight of the United States. California has no real say over its own boundaries as a result of its admission to the union. It was admitted as is and can't reconstitute itself unilaterally. This bears mentioning.
7.14.2009 4:00am
Guest056 (mail):
Also, Steven Greenhut's article strikes me as an O.C. fella using the present crisis to rehearse an old theme: split me off from L.A. County!

The budget could be better -- the budget could be fine -- and he'd want the same thing. It's an Orange County thing.
7.14.2009 4:08am
Ricardo (mail):
Aside from the warm weather and nice scenery, people stay in California for another reason: education. Public schools in the Silicon Valley area, for instance, are by all accounts top notch. Sure, people pay through the nose in property taxes and real estate prices for this but that's also true of any area with better public schools than the surroundings.

Additionally, universities in the UC system are among the best public universities in the country (UC Berkeley was ranked the second best research university in the world next to Harvard) and being a California resident means you save at least $16,000 per year on out-of-state tuition -- not to mention that it's much easier to get admission if you are a California resident. If you have two children, that benefit alone is worth $128,000

In short, people get significant benefits for all they pay in taxes and there is no political consensus to seriously cut spending in the state.
7.14.2009 4:09am
Athos:
I think CA should be broken up. It doesn't make sense that the political distribution on the state level seems to be up within the bay area, at most to Los Angeles, and even less in places such as the Inland Empire.
7.14.2009 4:10am
Tony Tutins (mail):

Ilya gets the question exactly backward in saying that the Constitution forbids partitioning a state without its consent.

Article IV, Section 3 seems pretty clear. Ilya's right as far as he goes.
7.14.2009 4:12am
DiversityHire:
Ricardo, California has the best and worst public K-12 schools in the country; on average they are 49th in the country—so there are many more bad schools than good. That's not a good return on investment for most Californians. The average California high-school student is not prepared to enter, much less succeed at, any of the UC schools. Similarly, most Californians drive home to a place more like Reseda, Fontana, or Inglewood than Rancho Palos Verdes, Woodside, or Beverly Hills.
7.14.2009 4:22am
DiversityHire:
Another article on the subject. I think the magic number is five or six, though, not four.
7.14.2009 4:29am
Guest056 (mail):
Tony,

Yes. That's true. My post was sloppy in several respects. It's not "exactly backward" to quote the Constitution. My point is, the Constitution -- especially as interpreted in Texas v White -- indicates that the entire question of how to split a state is really in the hands of the federal government. I fail to see why Ilya, of all people, would want to invite that. That should have been the focus of my post. And when I said it "might require an amendment" I should have added "to place the particulars in the hands of the people of California." Which, presumably, is what Ilya would want. He doesn't strike me as wanting to leave the division of a state up to the federal government rather than the people of the state. But that, I'd argue, is the present understanding of Article IV section III. So to just mention that the clause, in this context, requires the approval of the states, gets it "backward" in the sense that, at present, it mandates for California little direct control in the process beyond offering approval.

But now that I read his post more closely -- I think I might've been wrong in assessing Ilya's perspective. He doesn't seem particularly concerned with this sticking point. The way he says the legislature would "probably have to agree" suggests that he does want someone besides the legislature of the states to specify the plan.
7.14.2009 5:03am
UW3L:
Ricardo wrote:


Aside from the warm weather and nice scenery, people stay in California for another reason: education. Public schools in the Silicon Valley area, for instance, are by all accounts top notch. Sure, people pay through the nose in property taxes and real estate prices for this but that's also true of any area with better public schools than the surroundings.


I started smiling after that first sentence, then I realized the commenter wasn't joking. Apparently "ranked 48th in the nation" and "Prop 13" are phrases not commonly bandied about anywhere near him.

Some public schools in Silicon Valley/SF/Santa Cruz are top notch. They are the exception rather than the rule as far as California goes. And while good schools are a big driver of home prices around them, high home prices don't guarantee good schools. (See Prop 13, and its progeny, Prop 98 - both products of the constitutional initiative process, which I think may have come up once or twice in this thread.)

If your kid somehow survives the primary schools, earns the grades to get into UCLA, and doesn't get told to go twiddle his thumbs in a community college and transfer in after 2 years even though he made grades, because of the UC's budget problems... then - then! - sticking around in California for the education will finally have paid off. (Until you see UC law schools' tuition, anyway - even for residents.)

Also, really, Prof. Somin - those unfortunate souls who are now two weeks away from taking the California bar exam really don't need even the specter of all their efforts coming to naught because the damn state ceases to exist. Have a little consideration, and not of the contracts kind.
7.14.2009 5:17am
Cato The Elder (mail) (www):
I think it's better to leave California [and Michigan] alone as a stern example to the other states of what happens when you take big-government ideology too far (I'm blaming both Republicans and Democrats here). It'll sputter along long enough, but unfortunately the State will never regain its former status as the crown jewel of the Union.
7.14.2009 5:21am
Andrew MacDonald (mail):
Economic geography has routinely suggested that Tiebout type competition has very little empirical support. After all, why don't people flee the tax "hells" of Scandinavia? It surely isn't the weather that is keeping them there. Or even better question: why isn't there Tiebout-type competition among Scandinavian countries? Why don't corporations there all leave? France also has many Fortune 500 companies that don't appear to be going anywhere, in spite of the general anti-corporatism attitude of the government.

Furthermore, NY, Silicon Valley, and Boston (all very heavily liberal areas) have increased their GDP/Capita lead on the rest of the nation in the last few decades, suggesting that there may be a reverse-Tiebout outcome.

The dynamics of economic geography are quite complex, but suffice to say that marginal taxation is only one factor in the location of economic activity, and decisions about where this activity take place are probably more heavily influenced by transportation, communication, land, capital, and labor costs/availability than by taxation regimes

This is especially so, considering that corporations receive benefits from tax expenditures (even if you argue that they are provided less efficiently than they may have privately been acquired; a typical rule of thumb of conservative economists is the deadweight loss of government provision is about 20%). So, even by using conservatives' figure for loss to corporations due to taxation is 20-30% of actual taxes taken, this means a difference in marginal tax rate of 10% is only going to result in a realized 2-3% loss, which can very easily be completely swamped by other economic geography factors.

Paul Krugman wrote a great introduction to this situation:
Paul Krugman's seminal article on
7.14.2009 5:47am
Grant Gould (mail):
<i>Of course we wouldn't want states that are too small to exploit economies of scale.</i>

Pardon my ignorance, but is there any evidence that such economies of scale exist? It's hard to see quite where they would be for anything larger than a mid-sized city.

I think when people speak of economies of scale in states they usually mean "a state so large that it is difficult to leave" -- monopoly rather than economy, and exactly the sort of thing you are coming out against.
7.14.2009 6:52am
cbunix23:

Why should this problem be fixed, our federal system allows states to make bad choices, and good ones. Californians should suffer the consequences of their bad choices. The want to live in a "socialist paradise" let them.

The ones that are able to leave are not all innocent of the debacle there. Does the phrase "Californication" mean anything to you ? When Californians move to another state those same "smart people" often vote for the same policies they left behind in California. They bring their dumb ideas with them to their new state. That's not an improvement.
7.14.2009 7:01am
PersonFromPorlock:
The fact that California worked (at least, as well as most states do) for 150 years argues that its problems aren't structural but behavioral. It's the people running the show, and not the show itself, that needs changing.
7.14.2009 7:06am
Owen H. (mail):
Balkinization in America, what a grand idea!
7.14.2009 7:09am
David Schwartz (mail):
Once enough special interests get gored by the crisis, there may be the political will to swallow a pill like this. However, it won't happen until quite a few groups believe things possibly can't get any worse.

There was talk about splitting Texas once and it failed because nobody wanted Houston. Similar issues might occur with Los Angeles.
7.14.2009 7:16am
Floridan:
It seems to me that breaking up California into multiple states would have, at best, a marginal effect on people "voting with their feet."

Young people tend to VWTF for educational and occupational opportunities, often moving a thousand miles to urban areas such as Boston, NYC, Chicago or San Fransisco. Older people tend to VWTF when they realize that if they sell their appreciated, paid off house and move to a more rustic (or warmer) area with a lower cost of living, their retirement dollars go farther.

I'm not sure taxes are the motivating factor for most people. Here in Florida, plenty of people pick up and move to North Carolina where the per capita tax burden is about 12% higher, but housing and land costs are lower.

Of course, if you can't sell your house, you probably are going anywhere.
7.14.2009 8:28am
Tom952 (mail):
Lets see. LA, SoCal Ex-LA, and Northern California.
7.14.2009 8:33am
iowahawk (mail) (www):
There is a precedent for splitting up an existing state: after Virginia voted to secede from the Union in 1861, a bunch of counties in the western part of the state voted to meta-secede from Virginia and rejoin the Union. That's pretty much how West Virginia came to be.

As for the ills facing California, the idea that Prop 13 starved it from life-giving tax oxygen is ludicrous. When it passed in 1979 CA was the #4 tax state (% of income ranked), and in the year afterward in dropped to #22. It rapidly regained its position the % tax burden rankings, and is back at #5 (topped only by NY, NJ, WI, &I think MD). And I'm scratching my head over the claim that CA voted itself goodies through the initiative system, as I can't think of a single major CA budget item forced by citizen ballot.

Every honest assessment of California's mess has to start with the target special interest spending in Sacramento - in particular the salaries, pension and other benefits paid to current and former state employees. California's 2009 budget would be in surplus if the state returned to 2004 spending levels. Of the spending increase in those 5 years (+$26b), $6.3b came directly from state retirement system pension spending, and much of the increase in spending on other major categories (Education etc) were driven by HR cost. It's self perpetuating, mutually parasitic arrangement between Sacramento and AFSCME, SEIU, and the NEA. Unfortunately it's now killing the host organism.
7.14.2009 8:40am
silverpie:
That wasn't even the first case of a state splitting. The Missouri Compromise was to admit Maine, until then part of Massachusetts, as a free state and Missouri as a slave state, maintaining the equality of the two sides in the Senate.

And the Constitution is indeed clear that both Congressional consent and that of the states involved is required to create a new state that includes territory from an existing one. (Texas obtained advance Congressional consent to split in its admission agreement of 1845, although it is disputed whether that survived its secession and readmission.)
7.14.2009 8:59am
Melancton Smith:
I grew up in Northern CA (moved out at age 15). We always felt a division between North and South CA. I never noticed a similar East/West divide, though I was young.

Now in IL there is a definite Cook County divide. Many folks want to split IL into two states.
7.14.2009 9:00am
rosetta's stones:
It's self perpetuating, mutually parasitic arrangement between Sacramento and AFSCME, SEIU, and the NEA. Unfortunately it's now killing the host organism.

However, it can't really kill the host organism. The host will have to survive, somehow, and that will force the necessary choices. Somebody's oxe is going to be gored, and by default, it will be those public employees' unions.

California has often been harbinger of movements political, and I suspect they are about to show the rest of the country how we'll be managing our own fiscal madness. Pay attention.
7.14.2009 9:01am
Mikeyes (mail):
A more appropriate precedent for splitting a state might be Vermont which (technically) split from New York after trying to be an independent republic. Also Maine from MA (an exclave of MA, in 1820), Ohio from CT, even Tennessee from NC (although that one was pre-Constitution.)

West Virginia occurred in special circumstances not likely to be duplicated soon. The state of East Tennessee would have existed had Tennessee held out a little longer.

What California needs to do is to change its constitution, the third longest in the world, and get rid of all the mandated expenses. It is probably a lot easier to do this than to break up into several states and there will be far fewer unintended consequenses.
7.14.2009 9:06am
alkali (mail):
The state suffers from a grave fiscal crisis, extraordinarily high taxation (which, however, is still not enough to finance the state's exorbitant spending) ...

1) The Tax Foundation charts that are linked in the post (see p. 32) show that California's total rate of taxation is 10.5%, or $5028 per capita, versus a national average of 9.7%, or $4283 per capita -- a difference of $745. It's always nice to have lower taxes, but it takes a lot of heavy breathing to call this 80 basis point difference "extraordinary." Things like cost of real estate, nearness to suppliers and customers, etc., would matter more to business formation.

2) The Tax Foundation charts also show (p. 5) that California pays $47.6 billion more in federal taxes than it receives in federal spending -- which amounts to $1319 per capita. That difference more than accounts for the difference in California's tax burden. An uncharitable but perhaps accurate way of looking at that disparity is that California is being looted by its sister states, perhaps because of its lack of proportionate representation in the Senate.
7.14.2009 9:21am
SGD (mail):
I don't think it is accurate to say people do not "vote with their feet." For example, California had a net loss in domestic migration averaged more than 220,000 souls per year in the 1990s. During the same time period approximately the same number of international migrants moved into the state. The domestic migration from California slowed during the first part of this decade (to approximately 100,000 per year), but has now picked up again. The number of people leaving the state is masked by the number of foreign immigrants.

The boom in many of the western states has been driven at least in part by migration of people and businesses from California.
7.14.2009 9:23am
Tracy Johnson (www):
When I was a kid, there was a pamphlet published in the 1950's or 1960's to educate kids about the constitution. It went through the mechanics of dividing up a state and conjoining a portion of another state. The example they used were Southern California and a section of Arizona. The resulting state was "Calizona".

Perhaps Mr. Greenhut already had his "heart and mind" affected by such a tract when he was kid?
7.14.2009 9:26am
Gilbert (mail):
Interesting, but no one would ever be able to agree on how to split it up. Greenhut's "Coastal California" would be (approximately) just larger than the size of RI but have 10 times the revenue. Meanwhile, the "Central Valley," would be destitute, with enormous tracts of uninhabitable land.
7.14.2009 9:32am
martinned (mail) (www):
This (the original post) is a strange argument. The idea seems to be that California would be better if it were split up, without saying how it would be better. What different laws would those four states enact that California doesn't presently have? And why not simply advocate that California enact those laws itself?
7.14.2009 9:33am
LTR:
Splitting the state won't do any good. Only way to fix California is to stop electing liberals. You don't think Michigan or New Jersey should be split to, don't you?
7.14.2009 9:43am
rosetta's stones:
It's always nice to have lower taxes, but it takes a lot of heavy breathing to call this 80 basis point difference "extraordinary." Things like cost of real estate, nearness to suppliers and customers, etc., would matter more to business formation.

No, it's not "heavy breathing" to point out that Cali is #6 in state and local per capita tax burden, and that this excessive rate will have its impact over time.

It's hard to understand your statement that other things matter "more" than this excessive tax burden, or what you're basing your statement on. Perhaps you can provide some data to support your statement?

Additionally, the excessive tax burden is a manifestation of excessive state government intrusion into all facets of Cali society, including significant regulatory intrusions. CARB even presumes to dictate to the rest of the country on matters environmental.

So it's not just the excessive tax rates themselves, it's the tax rates' as canary-in-the-coal-mine for additional government meddling affecting the economic vibrancy of the state, which appears to be faltering.




An uncharitable but perhaps accurate way of looking at that disparity is that California is being looted by its sister states, perhaps because of its lack of proportionate representation in the Senate.

An uncharitable but perhaps accurate way of looking at water management in this country is that we should stop looting US taxpayers to pay for the greening of California, and start selling water from Lake Meade to Mexico, rather than giving it away for free to California.

But then, California has been built on water welfare, as we know, and I see little chance this will be stopping any time soon, as they will continue to gangsta the taxpayers to pay that welfare. I'm all for cutting 'em off welfare, though. Cut it off over 5 years, or make them pay their way. I suspect your numbers will tell a different story, when they're calculated properly, inclusive of all data sets.
7.14.2009 9:45am
Just Dropping By (mail):
As a couple of people touched on above, the biggest obstacle at the national level to breaking up California would be the fact that there aren't many plausible ways to divide the state that wouldn't result in the Democrats getting a net gain in the U.S. Senate plus an increase (albeit of a fairly small percentage) in likely Electoral College votes.
7.14.2009 9:51am
W. J. J. Hoge:
I voted with my feet.
7.14.2009 9:53am
Eli Rabett (www):
Having looked at this issue a while ago, it is without doubt that the US suffers from a rotten state problem as much as England in the 19th century had a rotten borough issue. As you point out, on the other side we have the especially California, but also Texan. On the other hand Delaware, South Dakota, North Dakota, Vermont and Alaska all have populations under a million. Combining North and South Dakota, Vermont and New Hampshire, and Delaware and Maryland would be the second necessary change. These two sets of changes would be roughly balanced politically.
7.14.2009 10:03am
David M. Nieporent (www):
So it's not just the excessive tax rates themselves, it's the tax rates' as canary-in-the-coal-mine for additional government meddling affecting the economic vibrancy of the state, which appears to be faltering.
Yes. Regulations are taxes. Every tax dollar used to hire an additional bureaucrat to enforce an additional regulation is a double tax.
7.14.2009 10:12am
Fub:
DiversityHire wrote at 7.14.2009 3:24am:
I don't think debt would be the biggest problem, that would be water...
Drewp wrote at 7.14.2009 3:59am:
The senate seats issue would be a fun national political fight. I think one of the reasons this would never happen, besides the fact that "blue" coastal areas subsidize "red" ares in terms of benefit spending and subsidies, is trying to divide up water rights and access would be a nightmare, and likely straddle any divisions the right would envision for california.
Exactly.

Any division that limited southern CA' and the central valley's rights to bleed the northern Sierra Nevada's water cheaply would be a political loser. Too many people's lives and livelihoods depend on the water deals cut in the 19th century.

Issues such as how to gerrymander federal political representation would pale in comparison.
7.14.2009 10:13am
HSAHM:
Reminds me of the classic Pavement (themselves classic indie rockers) song Two States:

Two states!
We want two states
North and south
Two, two states
40 million daggers! [x4]
Two states!
We want two states
Theres no culture
Theres no spies
40 million daggers! [x4]
7.14.2009 10:23am
alkali (mail):
@rosetta's stones: It's hard to understand your statement that other things matter "more" than this excessive tax burden, or what you're basing your statement on. Perhaps you can provide some data to support your statement?

Uh, no. I already provided data. Insisting that you are right and demanding that I prove otherwise is not really a response.
7.14.2009 10:27am
rosetta's stones:
No, you provided data that confirmed that Cali is #6 in per capita tax burden, and all due respect, but we are all likely already aware of that excessive tax burden.

You then proceeded to make the claim that other things matter "more" than that excessive tax burden, but provided absolutely no support for your claim.

You'll need to provide some data to support your claim, else it's rightly dismissed as baseless.
7.14.2009 10:35am
Smooth, Like a Rhapsody (mail):
Rosetta

It is heavy breathing to the extent that (using your data) the 5 states with higher tax burdens are not on the brink of receivership (assuming that this is the case).

How do you define "excessive" taxation"? If #6 makes the list, how many other states do as well?

California's dysfunction stems from much more, it seems than tax structure.
7.14.2009 10:39am
MarkField (mail):
I'm not sure about CA's tax burden as given in the link. This cite uses a more sophisticated analysis and puts CA 18th in tax burden.

The proposal to split the state is a non-starter; there's no political support for that here. As others have noted, the dividing lines would be arbitrary and probably create more problems than it would solve.

So what are the solutions? CA suffers from too much direct democracy (initiatives) and too little representative democracy (Prop. 13 and the budget rules). The former allow voters to pass spending programs without paying for them. The latter allow a minority to block majority rule on the funding side. In addition, gerrymandering creates a legislature that provides too many safe seats for both parties, encouraging extremists; and overly short term limits mean that legislators don't know what they're doing.

CA's problems can be solved by opening up the system so that the majority decides both spending and revenue at the same time, plus a couple of structural changes to make sure the majority in the legislature better reflects the majority in the state. Libertarian fantasies need not apply.
7.14.2009 10:43am
rosetta's stones:
Smooth,

I'd agree that excessive tax rates are not the sole indicator of governmental disfunction, and it is the impending "receivership" aspect of this that is the most-correct indicator of disfunction, as you imply.

However, I believe the tax issue was brought up earlier in the above discussion as the reason that Cali was about to enter receivership... lack of tax revenues, or lack of taxing authority, or whatever excuse was made.

Nope. The tax burden is well above national average, as we see, so there's some other reasons for the disfunction, clearly, as you seem to agree.
7.14.2009 10:46am
troll_dc2 (mail):
This is a fun topic for sure.

An effort was made in 1941 to combine northern California and southern Oregon (along with a county or two of Nevada in some versions) to form the state of Jefferson. From what I can tell, the major issue was neglect of the area by the states, especially with regard to roads. The project was supposed to be announced on 8 December 1941. But an interesting event had occurred the day before, and that was the end of the proposal.

You can read about it
here and here.
7.14.2009 10:47am
Tregonsee:
Here in Tennessee, we have been getting a surprising number of refugees from California, both corporate and individual. That has helped prop up the real estate market, and the tax base. Individually, Californians have turned out to be pretty good people, once they learn that they are expected to behave as adults, take responsibility for themselves, and not call their lawyer twice a day.
7.14.2009 10:50am
rosetta's stones:
The former allow voters to pass spending programs without paying for them.

Mark, in this discussion and other discussions, others have disputed your statement, with data and legislative and state constitutional analysis to support their argument. Their claim has been that citizen initiatives do not mandate current spending levels. You haven't addressed their arguments, you're just continuing to make the same statement. I got no dog in this fight, as long as federal money is kept out of the equation (a losing battle, evidently) and blame the people of California for whatever is and will transpire, but you really should address those folks' arguments about mandated spending levels.
7.14.2009 10:55am
BN (mail) (www):
If people were really that motivated to move because of taxes then the population of South Dakota would be exploding.

I just don't see taxes as high on the list of reasons to move.
7.14.2009 10:56am
Smooth, Like a Rhapsody (mail):
Given that MarkField's analysis is almost certainly correct--are there any credible alternative analyses?-- what does this say to all the paradigmatic old lefty "participatory democracy" cheerleaders that have darkened the groves of academe, lo these many decades?

Is not California a resounding refutation of the premise that letting everyone decide everything is the way to political nirvana?
7.14.2009 10:58am
AJK:

Having looked at this issue a while ago, it is without doubt that the US suffers from a rotten state problem as much as England in the 19th century had a rotten borough issue.


I don't think that's true at all. The average congressman represents bout 650,000 people: the only state with a significantly smaller population than that is Wyoming: a state like Delaware has a congressional district much larger than the national average. Plus, most of the smaller (in population) states are very large (in area), which makes campaigning more difficult.

As for the Senate -- well, if Wyoming had been a state in 1790, it would have been the second biggest in the Union, after Virginia; does that mean that those states were all "rotten" too?
7.14.2009 10:58am
John M. Perkins (mail):

No, I'm saying that CA isn't losing as much population as it otherwise would given its awful policies because the cost of exit is unusually high. Partitioning the state lowers the cost of exit (and enables some people to change policies at no cost at all).


If the market doesn't work the way you want the market to work, then change the rules of the market. But then the cost of exit is a first principle.

While we are at it, let's partition Virginia into Nova, Tidewater and Appalachia. Let's partition D.C. into quadrants. I cannot think of a state where whiners wouldn't like to partition off the others. Maybe we can partition off South Ossetia to help the oil market in Russia.

Meanwhile, a state that can't pass a budget could pass a partition bill?
7.14.2009 11:00am
troll_dc2 (mail):
The political obstacles to a breakup are enormous, but the will could be there at some point. I note a recent article in The Economist on the topic. It seems to me that the only way that the process could get under way is if the state goes to Washington with tin cup in hand and warns that its collapse will threaten the entire national economy. Washington really wants no part of this, but the danger to the economy might persuade it to help the state--so long as it makes structural reforms of the sort that MarkField suggests. The state will resist, to be sure, but maybe riots and other signs of social collapse will persuade the decisionmakers to give in. In such an atmosphere, I think that the idea of breaking up the state will have resonance.

The issue of water rights certainly will have to be addressed, and perhaps new concepts will have to be devised; I have no idea. But I also foresee another problem, which is that some of the new states will start out in much better shape than others. At least one is sure to be a loser.

If the state is split somehow, at least one problem will be taken care of: the unwieldiness of the Ninth Circuit. No proposal to split up the circuit will solve the problem without dividing California, given the huge percentage of appeals that come from that state.
7.14.2009 11:02am
Art Eclectic:
California's problem is not its size, it's the government and proposition system. Governing California is like running a country, which should be feasible. However, the state has been gerrymandered to death and the proposition system has left California irretrievably broken. Another significant problem is overly generous pensions plans and powerful unions like the prison guards that are able to push excessive compensation and pension guarantees off onto the taxpayers.

What the state needs is to go bankrupt, void all existing union contracts, eliminate the proposition system and void all existing propositions. Then it needs to be redistricted by a non-partisan panel so that no single party controls the legislature so emphatically. The state also needs to drastically reduce levels of public assistance, which are among the most generous in the nation. In short, California's number one problem is too many people depending on the taxpayer for their living, while the taxpayers (private citizen and business) are leaving because they are being taxed to death. This is unsupportable in the long term and what we are witnessing is parasites killing the host.
7.14.2009 11:02am
RichW (mail):
LTR: you said: Splitting the state won't do any good. Only way to fix California is to stop electing liberals. You don't think Michigan or New Jersey should be split to, don't you?

NJ has about 8.6 million people - you split it and it become two very small ineffective states. Is that better than one? Problem with NJ is that what use to be very republican areas are not any longer. The migration has always been from New York City to NJ but now you are getting the liberals who come and want to make just like Manhattan. So yeah, if I thought we would actually a fiscally conservation Governor and legislature I would split it in a minute.
7.14.2009 11:03am
rosetta's stones:

W. J. J. Hoge:
"I voted with my feet."


No doubt others are, as well. And given that California has a progressive income tax system, it's likely that those voting with their feet are those paying the most income taxes.

That's the dirty little secret here, I suspect. The per capita tax burden is high, #6 in the nation as we've seen, but a deeper analysis might show that the real problem arises if that tax burden is overlaid inequitably... and yes I'm using that term advisedly.

Are they running off the people who are paying their bills?

Like I say, California has always been a rich source of political thought, and we'd do well to study them, in good times and bad.
7.14.2009 11:11am
JCC:
As a native San Diegan, I must say that I'm quite happy to have a large desert separating us from the rest of the State (and country). Can we just cut things off above Camp Pendleton (and maybe keep Imperial Valley for its farmland and Co. River access) and let the rest of the State handle itself?
7.14.2009 11:12am
kdonovan:
Mancur Olsen had a theory that long established democracies became sclerotic as special interests captured the government. He noted that major reorganizations, such as after defeat in war, allowed them to start over and enjoy higher rates of growth. Breaking up CA would involve new constitutions and the opportunity to shake things up that, if take, might allow for a new burst of entrepreneurial activity in CA. OTOH if the same old pro-statist structures were just duplicated it probably would not help much.

I wonder if it is even feasible to split a state with such a massive debt (public pensions). How would this be done and would the future pensioners (state employees) accept it? If the legislature is already captured by spending interests how could the state be split if the consent of the legislature is required? If the state's political system is ready to deal with the debt and spending then splitting is not necessary, if they are not splitting is politically impossible.
7.14.2009 11:15am
rosetta's stones:
If the state's political system is ready to deal with the debt and spending then splitting is not necessary, if they are not splitting is politically impossible.

This is a brilliantly incisive statement. Well said, sir.
7.14.2009 11:19am
troll_dc2 (mail):

Given that MarkField's analysis is almost certainly correct--are there any credible alternative analyses?-- what does this say to all the paradigmatic old lefty "participatory democracy" cheerleaders that have darkened the groves of academe, lo these many decades?

Is not California a resounding refutation of the premise that letting everyone decide everything is the way to political nirvana?



I know that the initiative was introduced because so-called reformers thought that the legislature was bought and controlled by the Southern Pacific Railroad. But I frankly never understood why the proposition process does not violate the concept of a republican form of government.
7.14.2009 11:25am
Occasional Lurker:
Someone wrote, "You'll need to provide some data to support your claim, else it's rightly dismissed as baseless."

I dunno about that as a general matter, but I might as well ask -- how does Ilya know that the cost of exit from California is "high"? It seems plausible, but is there a ranking of the states? Does California have the highest exit cost?

If someone's done the work, then presumably we'd also have some data or modeling about the factors in exit cost. And perhaps even category breakdowns. E.g., other posters have already commented on how there are age breakpoints like young adults leaving home, or retirees/elderly getting out of the cold.

IMHO the partitioning recommendation puts way more weight on territory size than it can bear (I wonder what Hawaii's exit costs are?), and of course it won't happen, but it's interesting.

I've lived in California since 1975, and it's a great place to live. Although I could do without the fires and earthquakes.
7.14.2009 11:26am
Jon Roland (mail) (www):
California is already broken up. Into 58 counties, which collect and spend most of the taxes and are more independent of state government than counties are in most other states. Some consider them to be like little states unto themselves. If voting with one's feet worked it would be seen in migration from one county to another, and indeed, some of this does happen.

If ythe idea of splitting California could work, it would be easier to shift more power from the state to the counties.

Revising the California Constitution would help, but not as much as revising the civic culture, which is dominated by people who have had it too good for too long and have become detached from reality. Only pain will cure that.

Redistributing power does make sense, but not so much from the state to the counties, as from both to local townships, wards or precincts of about 3000 people each, with each having its own judge, constable, and other functions of government, but in a community in which it is possible for everyone to know one another, and in which everyone will have to take his turn at helping to make government work.

When this country was founded, few counties had populations of more than 3000. Grand juries serving that number could devote their time to supervising the functions of government rather than confronting hundreds of indictments every day.

Forget economies of scale. There is a greater value of civic participation, which can only work well in small polities.
7.14.2009 11:27am
troll_dc2 (mail):
Art Eclectic suggests that the state needs to go through bankruptcy so as to void all of its oppressive obligations. But I have read somewhere that no provision in the Bankruptcy Code applies to a state. If this is true, Congress would have to pass an amendment to the Code--and can anyone imagine a Democratic-controlled Congress enacting legislation that would hurt the public-employee unions?
7.14.2009 11:33am
MarkField (mail):

Mark, in this discussion and other discussions, others have disputed your statement, with data and legislative and state constitutional analysis to support their argument. Their claim has been that citizen initiatives do not mandate current spending levels.


There are two separate and distinct issues here. One is the overall spending level in CA, the other is the specific spending mandated by initiative. It's true that initiatives don't mandate the overall levels of spending. What they do (at least sometimes) is establish a program which the legislature then must fund. That contributes to the overall spending, although it doesn't constitute the entirety of it.
7.14.2009 11:49am
Melancton Smith:
When calculating the tax burden shouldn't you consider the deficit? Assuming the deficit needs to be made up, wouldn't that indicate that it is possible this could be made up with higher taxes? I'm not saying that would work, but somehow the cost of the deficit needs to be factored into the cost of living in the state.
7.14.2009 11:50am
Tony Tutins (mail):
After a good night's sleep, I realized that splitting the state will just multiply the number of troubled states.

In relatively recent times, special interests have persuaded the citizenry to forever earmark tax money their way. This cuts the discretionary sector down to nothing. The teachers unions are currently running broadcast ads whining that Schwarzenegger is not meeting his Prop 98 committments to funnel their full amount of tax money to them. (Prop. 98 primer here.) There are Prop. 98 analogs for other special interests.

As I said upthread, you can't get blood from a stone. The cupboard is bare. What is the name of the problem that Democrats and public employees have, innumeracy? Cargo cultists seem to have a more rational understanding of where the goodies come from.

Even my dog understands the concept of "all gone" when I share a treat with him. Yet California Democrats do not.

The only prospect of hope would come from barring the state's current politicians from holding office in these new states.
7.14.2009 12:03pm
rosetta's stones:
There are two separate and distinct issues here. One is the overall spending level in CA, the other is the specific spending mandated by initiative. It's true that initiatives don't mandate the overall levels of spending. What they do (at least sometimes) is establish a program which the legislature then must fund. That contributes to the overall spending, although it doesn't constitute the entirety of it.

I'm not going to make the others' arguments for them, and can't, but the point they seemed to make at the time is that the closest thing to initiative-mandated spending is a mandate for education spending as a % of total budget, and that the rest of spending is in the state government's (feeble) hands.

As I say, I have no dog in this fight, but it appears that per capita tax burden is plenty high, so it appears sufficient revenue is at hand. And, state government has the means to use that revenue to balance the state budget, but is not, and is in fact spending far more than current revenue. What am I missing here?
7.14.2009 12:05pm
byomtov (mail):
Cali is #6 in per capita tax burden, and all due respect, but we are all likely already aware of that excessive tax burden.

A state's high relative ranking in per capita taxes does not make its taxes "excessive." Some state has to be number 6, and some state number 1 for that matter. It's the size of the burden, not its rank, that would make it excessive.
7.14.2009 12:07pm
Tony Tutins (mail):

state government has the means to use that revenue to balance the state budget, but is not, and is in fact spending far more than current revenue. What am I missing here?

Tax revenue has been committed to various sectors of government in perpetuity, irrespective of the actual amount of tax revenues. Large amounts of money committed when the state was flush were unsustainable in hard times.

Before the manure hit the ventilator, Schwarzenegger tried to set up a rainy day fund to cushion the blows of the business cycle, when both income tax and sales tax revenues failed. The Democrat-controlled legislature wasn't buying that.

Another egregious example of Cal Dem stupidity: The great humanitarian Rob Reiner got the taxpayers to establish a wonderful program for young children, funded entirely by nicotine addicts. As smokers die or quit, this program must be funded somehow.
7.14.2009 12:13pm
PQuincy1:
Ilya uses a Tax Foundation link to justify the term "extraordinarily high taxes", and the link does indeed show that California collects a higher percentage of state total personal income than do other states. But what surprised me is how modest the difference was -- less than 1% above the US average collection percentage. (Now, CA has higher income than the national average, so the gross personal tax collection rate is further from the US average than the percentage rate).

Using a Brookings site, I also noticed that California state and local public expenditure is also higher than average -- and here the deviation is greater (but based on gross, not income-adjusted rates, here) -- California's index here is about 114 (national average 100), which puts it well below other key blue states (NY, NJ, Delaware), and wildly below the low population red states (Alaska, Wyoming), but still near the top.

Even here, though: California is spending only 15% more per capita on state government, and collecting only 1% more of state gross individual income: this tells me that CA is definitely a "blue state" (higher taxes, higher expenditures and services), but hardly justify the expression "extraordinary."

Moreover, CA's total tax burden over the last 20 years has been extraordinarily stable -- about 10.5% +/- .3%, it seems. This is a crisis??
7.14.2009 12:17pm
rosetta's stones:
It's the size of the burden, not its rank, that would make it excessive.

Now you're playing semantics. That tax burden can only be adjudged "excessive" in relation to something else, and that something else is the rank order of states' tax burdens. The "size" of the burden is meaningless, until it's placed in that rank order, at which point the data becomes useful, and we can compare it with other data points, and see if anything pops out as "excessive".

An isolated data point means nothing, and provides nothing useful, absent the full data set... and in rank order. Sorry to have to disavow you of any false notion to the contrary.

44 other states place less tax burden on their residents per capita than California, and only 5 other states have deemed it sound policy to pound down a greater tax burden.

Revenue doesn't appear to be the problem in Cali, clearly. It's something else. Think spending.
7.14.2009 12:19pm
Tony Tutins (mail):
PQuincy1: Look at the margins and not just the average per capita.
7.14.2009 12:25pm
PQuincy1:
Another point: the crisis facing California now, like the one in 2001-03, are not conjunctural, but exacerbated by a dysfunctional tax system. It's not the total tax burden that is the problem -- as many others in this thread have pointed out, it's been high for 40 or 50 years, and it's hard to argue that CA has been in one long deep crisis that entire half-century.

Rather, this year's sudden sharp crisis rests largely on a more than 20% decline in immediate tax revenue -- probably more than 20% as real estate taxes reset or are appealed. Too much tax revenue comes from marginal capital gains taxes on a small number of tax payers, too much from sales taxes limited to non-essential goods, and not enough from reliable non-volatile sources (like property taxes, thanks to the weird subfeatures of Prop 13: if Prop 13 were simply a 1% limit on annual property taxes, it would be fine, but the per-annum limits and the heritability of assessments means that CA's actual property tax rate is about 0.5%.

So, it's not the overall tax burden that has led to crisis: it's the structure of that burden, largely.
7.14.2009 12:28pm
Tony Tutins (mail):

not enough from reliable non-volatile sources (like property taxes

I agree that the state does not have enough leverage to demand tax money from residents irrespective of their income. I disagree that that is a good thing.

The California income tax is progressive: the more you make the more you pay and if you make a lot you pay a higher percentage, because you presumably do not need it for the necessities of life.

The California sales tax is not progressive, but at least it exempts food. Presumably if you're able to buy more, you're able to pay the additional >9% to support government.

But the property tax is regressive: You have to pay it whether you have an income or not, and if you don't pay the government will take your house away. This "reliable, non-volatile" income source is indistinguishable from extortion. "This is a nice house you have here. It'd be a shame if you had to lose it."
7.14.2009 12:35pm
rosetta's stones:
"But what surprised me is how modest the difference was -- less than 1% above the US average collection percentage."

Not sure how you arrived at this, but you've apparently made a mistake somehow.

Cali's 2008 state-local per capita tax burden was 10.5%, and the US national average is only 9.7%, meaning that Cali's per capita tax burden is 8.2% greater than the US national average... not 1%.
7.14.2009 12:39pm
George Smith:
Tfhe quickest way that the California state government can be reformed is if the the head of In 'n Out Burger says they are closing up shop because of the state regulatory and tax environment. Then you'll see some reforms pronto.
7.14.2009 12:41pm
gab:
kdonovan said:


I wonder if it is even feasible to split a state with such a massive debt (public pensions). How would this be done and would the future pensioners (state employees) accept it?


Public pensions are not a "massive debt." There are assets (not enough currently) invested to fund the pensions.
7.14.2009 12:45pm
The Drill SGT:

Melancton Smith:
I grew up in Northern CA (moved out at age 15). We always felt a division between North and South CA. I never noticed a similar East/West divide, though I was young.


Born in Chico, raised in SACTO, degrees at a couple of UC schools, trapped in DC by my Federal spouse.

like the movie Chinatown, all fights in the West are about land, and ultimately about water, or the lack thereof.

Those bastards in LA stole our water :)
7.14.2009 12:46pm
Oren:

But the property tax is regressive: You have to pay it whether you have an income or not, and if you don't pay the government will take your house away. This "reliable, non-volatile" income source is indistinguishable from extortion. "This is a nice house you have here. It'd be a shame if you had to lose it."

Except that you know, in advance, when you acquire the house exactly what the tax will be for the duration of your ownership. It's more like you acknowledge that you are a leaseholder with a rent that is fixed by statute.

Of course, all taxes are indistinguishable from extortion except for that whole representative-government thing. 'No taxation even with representation' makes for a fairly poor motto.
7.14.2009 1:01pm
A. Zarkov (mail):
California's current problems have been building for nearly two decades and stem from two sources: Mexicans and real estate.

California never really recovered from the recession in the early 1990s, but this lack of recovery was masked by the real estate bubble. The bubble caused expansion in banking, insurance, finance, residential construction, furniture etc. But this house of cards came tumbling down when housing prices went down, indeed all they had to do was stop going up. Now the basic weakness in the California economy is exposed. California used to have a large defense industry, now it doesn't. The numerous military base closing in the early 1990s in northern California also hurt the Bay Area economy a lot. Now we have a lot of people out of work in CA not paying taxes.

Mexican immigration to California both legal and illegal really took off after 1990. The problem with this is that on the whole, they are a net drain on the California economy. Low skilled, low wage workers don't pay for the state provided benefits they consume. Do the arithmetic. Five children cost they state about $55,000 to educate. Then there are medical benefits. The list goes on and on. Let's also not forget that about 1/3 of the inmates in California are illegal aliens.

The CIA factbook says the Total Fertility rate in Mexico is 2.3 children per woman, while the the TFR of Mexicans in California is almost 4. So when Mexicans migrate to California they increase the size of their families. Or more accurately, women have more children since the Mexican illegitimacy rate is about 50%. Young children don't work and pay taxes, they consume resources. This continuing demographic shift means California is becoming less productive.

In summary I don't see how splitting up California into smaller pieces is go to help cure this pervasive structural problem. Will new jobs come to a divided California? Will the Mexicans go home? It might slightly reduce the departure of the people who are currently paying for California's massive welfare system, but the problem is too big for that to help much. A split up is mostly rearranging the deck chairs on the Titanic.
7.14.2009 1:01pm
Tony Tutins (mail):

Except that you know, in advance, when you acquire the house exactly what the tax will be for the duration of your ownership.

I like that feature, but I understood PQuincy1 to be saying that was part of the problem. The process in other states, of taxing your house based on what someone paid your neighbor for his, is widely seen as the solution. Personally, paying property tax based on the price your neighbor received makes as much sense as paying income tax based on what your neighbor earns.
7.14.2009 1:09pm
A. Zarkov (mail):
Oren:

"Except that you know, in advance, when you acquire the house exactly what the tax will be for the duration of your ownership. It's more like you acknowledge that you are a leaseholder with a rent that is fixed by statute."

In a normal real estate market yes, but in California there's no such thing. When I bought my first house (before prop 13) in CA, my property taxes went up 20% the next year. When I discussed this with my California assemblyman at the time, Tom Bates (now the mayor of Berkeley) he told me that was impossible because the rate was lowered as the assessed value went up. He was either lying or clueless. I explained to him that the check I just wrote to the assessor was 1.2 times last year's check. I got the usual blank stare back one gets from a liberal when you demonstrate that he is full of shit. The next year my taxes went up again about 20%. Everybody else experienced the same thing and that's why we got Proposition 13.

Finally Proposition 13 only limits ad valorem taxes. In California we get hit with "special assessments," which are fixed costs added on to your property tax, and believe me that add up because every year you see new ones. So what you say might be true for North Dakota, but not California.
7.14.2009 1:13pm
Tony Tutins (mail):

The problem with this is that on the whole, they are a net drain on the California economy. Low skilled, low wage workers don't pay for the state provided benefits they consume.

But don't low wage workers provide a windfall for their employers? If you are arguing illegal aliens should be paid a living wage I commend your humanitarianism.
7.14.2009 1:14pm
ohwilleke:
A two state partition could be plausible. The natural place to draw the East-West line would be between Montery and Kings counties on the North (a total of forty-eight counties), and San Luis Obispo and Kern counties on the South (a total of ten counties). This line in addition to being obvious on a map, also reflects relatively authentically the economic ties of the counties involved to San Francisco and Los Angeles respectively.

One could call the Northern State "Golden," the state's nickname, given its proximity to the Gold Rush area, and let the Southern State retain the California name.

Sacremento could remain the capital of Golden. Los Angeles would be the natural capital of New California.

I don't see any natural economic and geographic units that would make good stand alone states beyond this two part division of the existing U.S. State. Incidentally, this is actually a four state partition of the entire area known as California. North Baja California and South Baja California are Mexican states.

A division would facilitate the division of the 9th Circuit into more management chunks, and would also ease the most acute disparity between population and representation in the U.S. Senate. It would require approval from the California legislature and from Congress, but the Congressional approval would require the simple majority vote of a law.

Since both Golden and New California would likely be Democratic Party controlled, a Democratic party controlled Congress would tend to favor it.

I'm not sure that two Californias half as large are really any more governable, but the opportunity a split would create for each half to redraw their state constitutions from scratch benefitting the from lessons learned to date could produce positive results.

California would also receive one of the benefits of federalism generally. Federalism does not prevent the kind of state governance meltdown that we have right now in California, but it does make it much more likely that only a small percentage of the population suffers that kind of meltdown at any one time. If there were two California, the odds are good that only one of them would have an economic meltdown at any one time (or do anything particularly bad for that matter). Thus, the risk of California by its sheer scale, dragging down the union if it malfunctioned politically, would be decreased.

The biggest downsides would be bureacratic transition costs, which would soon be forgotten in reality, and the harm a split would do to potential funding for a coastal high speed rail line.
7.14.2009 1:14pm
Tony Tutins (mail):

This line in addition to being obvious on a map

By the "obvious on a map" criterion, the dividing line should be Point Concepcion/the Tehachapis.
7.14.2009 1:17pm
second history:
Ilya sez:


Normally, the ability to "vote with your feet" is one of the strongest checks on dysfunctional state policies . . . If a state government has poor economic policies, excessive taxes, or bad public services, taxpayers will tend to migrate elsewhere, putting pressure on the state to clean up its act. . . . Even if the poorly performing state government doesn't shape up, at least migration will reduce the number of people who have to put up with it.

. . . . [T]he cost of leaving California is often much higher than that of leaving most other states. As a result, Californians have had to put up with more abuse than most other state governments could get away with.


The California Public Policy Institute (CPPI) recently released a report that shows that it is the poor, not the rich, that are more likely to leave California for states without an income tax:


More poor households than higher-income households leave California for other states. When we compare households that left the state with those that arrived from 2004 to 2007, those in the bottom fifth (with annual incomes of about $22,000 and less) are most likely to leave: 1.73 of the poorest households leave for every one that arrives. This ratio declines as income rises— so that among the top fifth (with annual incomes of about $110,000 and up), only 1.16 households leave for each one arriving. Among the highest-income households, with annual incomes above $200,000, only 1.09 leave the state for every arrival.

Households in the poorest fifth are twice as likely to leave as those in the richest fifth. The poorest group is also 50% more likely to migrate to California from other states as the top group. . . .

Among the poorest fifth, for every household that comes to California, 1.93 move to states without income taxes. On balance, California loses far fewer high-income households to states without income taxes.


In another study of domestic migration in California in the 1990's, the CPPI found that:


During the past decade, as many as two million more people left California to live in other states than came here from elsewhere in the United States. . .

Californians leaving the state are more likely than those who stay to be unemployed, to be less educated, to live in poverty, and to receive public assistance. In contrast, newcomers moving to California tend to have higher incomes and more education and are less likely to live in poverty or receive public assistance.


So it seems that there is "voting with your feet" among California residents, and those who are leaving are more likely to be a drag on state and local budgets.
7.14.2009 1:17pm
Bill Poser (mail) (www):
The next major earthquake might solve the problem.
7.14.2009 1:19pm
Tony Tutins (mail):

all taxes are indistinguishable from extortion

In a sense, yes. But I am talking about ability to pay. If I lose my job, my tax burden reduces in proportion. I'm not earning, but neither am I spending, and the taxes I pay are correspondingly lower. My property tax is fixed, however, and the assessor is implacable.
7.14.2009 1:25pm
A. Zarkov (mail):
Tony Tutins:

"But don't low wage workers provide a windfall for their employers?"

They do. But the rest of us have to pay for the benefits they demand from the state. Moreover lots of illegals work off the books and don't pay any taxes. The employer also evades FICA. In short a working illegal alien must either evade taxes or commit identity theft. Either way the rest of pay.

"If you are arguing illegal aliens should be paid a living wage..."

I'm not sure what a "living wage means," but how can anyone control what happens in an underground economy? The higher the minimum wages becomes the more you will see jobs shift to the underground economy. This is not good for the people who suffer a job loss to an illegal.
7.14.2009 1:30pm
gab:
A Zarkov said:


Finally Proposition 13 only limits ad valorem taxes. In California we get hit with "special assessments," which are fixed costs added on to your property tax


You or your neighbors have voted those "special asssessments" into existence. They don't just appear on your property tax statement.
7.14.2009 1:35pm
second history:
Bill Lockyer, California State Treasurer, has been thinking outside the budget box and suggests that the state should have two budgets, one for regions that want government services and are willing to pay for them, and one for regions that aren't:


"We'll have the budget for the coast that has tax increases and services," Lockyer said Wednesday in a wide-ranging interview with Times reporters. "And in a bunch of other areas in Central and Southern California that don't have tax increases . . . their public schools are closed a month of the year -- and see what happens."

The Democrat, a former attorney general and state Senate leader, called his idea a "genuine thought."

"If people in Orange County aren't going to vote for a state budget, I don't know why you shouldn't sell [UC Irvine] to Google," he said wryly. "Why is there a DMV office in Riverside? Those folks ought to figure out how to go to L.A. at night to renew their driver's license."


Another idea is to place on the ballot every two years two versions of the budget: one favored by the Democrats and another by Republicans. The voters would then choose what the spending paln would be for the next two years. If they want more government services and are willing to pay for them, then pass the Democratic plan. If they want fewer government services and lower taxes, approve the Republican plan. One alternative not on the ballot would be the current solution, which is more government services and lower taxes. It just doesn't work.
7.14.2009 1:39pm
first history:
ohwilleke sez:

A two state partition could be plausible. The natural place to draw the East-West line would be between Montery and Kings counties on the North (a total of forty-eight counties), and San Luis Obispo and Kern counties on the South (a total of ten counties). This line in addition to being obvious on a map, also reflects relatively authentically the economic ties of the counties involved to San Francisco and Los Angeles respectively.

Tony sez:

. . . the dividing line should be Point Concepcion/the Tehachapis.

I prefer a line drawn along the peaks of the Sierra Nevada, dividing the state into blue Western California and red Eastern California (see the map accompanying the article linked by troll_dc2 above). California's population has generally self-segregated along this line with the more liberal coast and conservative interior. California has already been divided once with an east/west line in 1804 with the creation of Alta California/Baja California.
7.14.2009 1:48pm
Toby:

Mexican immigration to California both legal and illegal really took off after 1990. The problem with this is that on the whole, they are a net drain on the California economy. Low skilled, low wage workers don't pay for the state provided benefits they consume. Do the arithmetic. Five children cost they state about $55,000 to educate. Then there are medical benefits. The list goes on and on. Let's also not forget that about 1/3 of the inmates in California are illegal aliens.

The CIA factbook says the Total Fertility rate in Mexico is 2.3 children per woman, while the the TFR of Mexicans in California is almost 4. So when Mexicans migrate to California they increase the size of their families. Or more accurately, women have more children since the Mexican illegitimacy rate is about 50%. Young children don't work and pay taxes, they consume resources. This continuing demographic shift means California is becoming less productive.

All of this says little more than you get more of whatever you subsidize. Politically, California has been unwilling to resis the impusle to subsidize all of the behavior above in the attempt to buy votes for the long term.
7.14.2009 1:59pm
Tony Tutins (mail):

California's population has generally self-segregated along this line with the more liberal coast and conservative interior.

As a big fan of divided government I pray the liberals never be isolated from the conservatives. Although it might be amusing to see a state with confiscatory taxes yet no income earners.
7.14.2009 2:04pm
martinned (mail) (www):

As a big fan of divided government I pray the liberals never be isolated from the conservatives. Although it might be amusing to see a state with confiscatory taxes yet no income earners.

Yes, because everybody knows that in California the big money is inland, in the Red counties away from the coast.

[BTW, talk about your "red scare"...]
7.14.2009 2:10pm
eyesay:
rosetta's stones: "Cali's 2008 state-local per capita tax burden was 10.5%, and the US national average is only 9.7%, meaning that Cali's per capita tax burden is 8.2% greater than the US national average... not 1%."

((10.5 - 9.7) / 9.7) = .082 or 8.2%. Thus, assuming your numbers are correct, it's correct to say that California's per capita tax burden is 8.2% greater than the U.S. national average.

10.5% - 9.7% = 0.8%. Thus, assuming your numbers are correct, it's also correct to say that California's per capita tax burden is less than 1% greater than the U.S. national average.

Both statements are true because in our English language, the words "percent greater than" can be taken to mean an additive difference or a multiplicative difference.
7.14.2009 2:11pm
martinned (mail) (www):

Both statements are true because in our English language, the words "percent greater than" can be taken to mean an additive difference or a multiplicative difference.

Which is why the former is usually described as "percentage points" difference. The natural way to describe the difference in tax level between California and the US average is "less than one percentage point", or "0,8 percentage points [sp?]" if you want to be precise.
7.14.2009 2:14pm
Tony Tutins (mail):

everybody knows that in California the big money is inland

Not now, after Coastland separates from the interior.

I'd like to see a bit of gerrymandering, like the West Bank and Gaza, or East and West Pakistan: Orange County would be part of GOPifornia, perhaps connected by a thin strip of land (a toll road, naturally).
7.14.2009 2:24pm
eyesay:
Ilya Somin: "Eliminating the supermajority requirement for spending would just exacerbate the state's already egregrious overspending problem." This assumes that the state already has an overspending problem. This is an assertion without evidence. Moreover, it is not even a decidable assertion, because a state's spending is a question of priorities, which is a political question, not a factual question.

Ilya Somin is entitled to his opinion on what the "correct" level of state spending ought to be (as is everyone else), but then what? Suppose someone believes that California should not spend any resources on the arrest, prosecution, imprisonment, and probation of casual users of certain recreational drugs. I believe it would take a lot longer to implement that policy change than it would to amend the constitution to allow a simple majority of the legislature to raise taxes than to pass a law decriminalizing recreational drugs.

High taxes do not make a place undesirable to live. In fact, California's historic tax burden made possible a great system of higher education that has spun off enormous benefits back to the taxpayers of California and helped make California a great place to live.

I wouldn't join a country club with low dues if it meant that the swimming pool wasn't maintained and the grass wasn't mowed. I wouldn't buy a condominium unit if the organization was not collecting enough dues to keep adequate reserves for expected building maintenance. Taxes are the dues we pay to live in civilized society. If more taxes mean better schools, better roads, better police and fire protection, better parks, and so forth, I'm happy to pay my dues. The California budget crisis means that the citizens of California need to raise the dues of California membership.
7.14.2009 2:33pm
jmc:

Another idea is to place on the ballot every two years two versions of the budget: one favored by the Democrats and another by Republicans. The voters would then choose what the spending paln would be for the next two years. If they want more government services and are willing to pay for them, then pass the Democratic plan. If they want fewer government services and lower taxes, approve the Republican plan. One alternative not on the ballot would be the current solution, which is more government services and lower taxes. It just doesn't work.



This seems like a sane idea to me. I like the idea of forcing voters to choose between two plans that are hopefully responsible, in that they are paying for their entitlements with tax revenue, or that they are paying for their tax cuts with entitlement cuts.

I think the idea would require some sort of legal mechanism that forces the two budget proposals to be balanced though. In order to prevent either side from just promising tax cuts without program cuts or the converse, to gain political advantage.

Also, It seems like, there'd have to be room in the process, for other political parties like the green party, or libertarian party. My fear is that too many budgets might confuse voters though, or that they might pass an insane budget without reading the details, which I suppose is why we have a representative democracy. I wouldn't mind seeing something like this though.
7.14.2009 2:36pm
yankee (mail):
The high cost of exit from California is mostly the result of geography. The state consists of a few major population centers separated by vast tracts of emptiness. Unless you're going to divide up the population centers (putting LA and Orange County in separate states, or doing the same with Silicon Valley and San Francisco), there will be no way to leave a populated area of one state for a populated area of another state without moving hundreds of miles away.
7.14.2009 2:37pm
Clayton E. Cramer (mail) (www):

But don't low wage workers provide a windfall for their employers? If you are arguing illegal aliens should be paid a living wage I commend your humanitarianism.
It's a windfall for the employers prepared to expoit cheap, unskilled illegal labor, and a detriment to everyone else. That's why Democrats support illegal immigration--it makes their fat cat contributors fatter.
7.14.2009 2:48pm
Clayton E. Cramer (mail) (www):

The new states would still have an illegal alien problem.
Some of the new states (the ones not dominated by rich liberals) would probably make it illegal to employ or rent to illegal aliens, and wouldn't have "sanctuary cities." They would turn over illegal aliens to ICE and have them deported. Unlike San Francisco, which put them in job training programs (at least, if they are convicted violent felons).
7.14.2009 2:51pm
martinned (mail) (www):

That's why Democrats support illegal immigration--it makes their fat cat contributors fatter.

That sounds like a reasonable and carefully considered hypothesis. After all, the Democrats are the party of the slave owning south.
7.14.2009 2:51pm
byomtov (mail):
Me:It's the size of the burden, not its rank, that would make it excessive.


Rosetta's stones:Now you're playing semantics. That tax burden can only be adjudged "excessive" in relation to something else, and that something else is the rank order of states' tax burdens. The "size" of the burden is meaningless, until it's placed in that rank order, at which point the data becomes useful, and we can compare it with other data points, and see if anything pops out as "excessive".

An isolated data point means nothing, and provides nothing useful, absent the full data set... and in rank order. Sorry to have to disavow you of any false notion to the contrary.


Don't be an idiot and don't give me lectures. A tax burden can be "excessive," or not, in relation to the level of income, or even the quality of state services. It's not excessive because it happens to be 6th among states. By your definition some set of at least six states would have excessive taxes no matter how low state taxes in the US were.
7.14.2009 3:09pm
first history:
Ilya believes California has an "egregrious overspending problem." What are his facts? I don't know, he doesn't provide any.

However, according the California's Legislative Analyst Office,

. . . [S]tate spending over the decade 1998--99 through 2008--09 (as proposed) by General Fund and special fund categories . . .grows over this period from $72.6 billion to $128.8 billion—an average annual growth rate of roughly 6 percent.

. . . After adjusting for inflation, real spending has grown by roughly 18 percent over the entire period, or an annual average growth rate of roughly 1.7 percent. . . .

Real per--capita spending—which adjusts for both inflation and population growth—would increase by about 2.2 percent over the period under the Governor's plan, for an average annual rate of 0.2 percent.


So spending by California has not been out of line with inflation or population growth. California's population has increased nearly 29% between 1990 and 2010, or 8.5 million--how does Prof. Somin (or anyone) propose to limit population growth? Population growth drives services--everything from freeways, to water, to social services, to police and fire services. And this is what drives state spending.
7.14.2009 3:36pm
first history:
Here are links to the California population data: 1991-2000 and 2001-2009.
7.14.2009 3:39pm
shawn-non-anonymous:
Gadzooks! Where to start? Disclaimer: I'm a Lompoc/Santa Barbara Native.

rosetta's stones:

"An uncharitable but perhaps accurate way of looking at water management in this country is that we should stop looting US taxpayers to pay for the greening of California, and start selling water from Lake Meade to Mexico, rather than giving it away for free to California. "


Lake Meade gets its water by damming up the Colorado River, which would flow on through California and into Mexico of its own accord, were it not for Hoover Dam. Perhaps Colorado could damn it up and sell the water to Nevada and Arizona?

Santa Barbara has an (expensive) desalination plant it could crank up and use to sell water to its residents. For a small, wealhty town like SB, that's do-able. For Los Angeles and the millions upon millions in its suburban area, that's going to be a lot tougher.

I voted with my feet. When I got out of the military at Nellis AFB I could return to California and go to college there or stay in Nevada and go to college there. California's tax costs were not the impediment many in this conversation seem to think it is. What did it for me was housing prices--renting or owning. I bought a house in Vegas in a lower-middle class area for $70K in 1990 and had a $500/mo mortgage payment. Going to UCSB and renting a room in Santa Barbara (Isla Vista) would have been impossible to do without funding from my parents, who weren't about to do that. So I stayed in Vegas and got my degrees. When I decided to leave Vegas in 2000, I took another look at moving home, where even rural areas with hour-long commutes were over $350K (often over $600K) and my wage potential in IT with an MS would buy a maximum of $250K. It just wasn't possible for me to live near home without giving up living in a single-family home in a middle-class neighborhood. So we moved to Tampa, FL where housing was much cheaper (but insurance and property taxes are high.)

The tax levels in California aren't the biggest problem. The biggest problem is the cost of housing in areas with decent jobs.
7.14.2009 5:13pm
Oren:

Since both Golden and New California would likely be Democratic Party controlled, a Democratic party controlled Congress would tend to favor it.

If the new States had mandated non-partisan districting, the GOP could do very well -- as it happens the State GOP is hopelessly too far right (and the State Dems are hopelessly too far left).

California produced Reagan and Nixon, it's not at blue as you'd be led to believe.
7.14.2009 5:54pm
Clayton E. Cramer (mail) (www):

That sounds like a reasonable and carefully considered hypothesis.
Take a look at where the money that elected Obama came from--it wasn't from poor people.
7.14.2009 6:26pm
rosetta's stones:
((10.5 - 9.7) / 9.7) = .082 or 8.2%. Thus, assuming your numbers are correct, it's correct to say that California's per capita tax burden is 8.2% greater than the U.S. national average.

10.5% - 9.7% = 0.8%. Thus, assuming your numbers are correct, it's also correct to say that California's per capita tax burden is less than 1% greater than the U.S. national average.

Both statements are true because in our English language, the words "percent greater than" can be taken to mean an additive difference or a multiplicative difference.


Sure, to a politician/lawyer, both statements are true, and the politician/lawyer merely spits out the definition that supports his case. If that case is to justify excessive tax rates, and mask the fact that those rates are greater than the national average, then that's what he does. Thus, an 8.2% difference becomes only 1%. POOF!

However, a proper analysis obligates us to, well, analyze the numbers, and weight them against other data points. And a proper analysis of this data requires us to point out that the Cali tax burden is 8.2% greater than the US national average... not 1%.
7.14.2009 6:53pm
rosetta's stones:
Don't be an idiot and don't give me lectures.

No, I'm not an idiot, and I'm only lecturing you on basic statistical analysis because you appear to need lecturing on it. When you find yourself 8.2% off the mean, that is statistically significant. It's you who's playing semantics with "excessive", not me.

The people of California just voted down the socialists' dream tax increase, so you might want to check with them re your preferred definition of "excessive", as they seem to agree with mine. Which is good, because I and they seem to be in line with the data.
7.14.2009 7:01pm
Don de Drain:
As one of the 135 candidates who ran in the California recall election a few years ago, I offer my unique (and undoubtedly flawed) perspective. When asked at the time of the recall election what I would have done if I won the election, the answer was simple: "Demand a recount!"

Now, when I read articles proclaiming that Arnold has ruined the state, I can state honestly that I could have done the same thing that Arnold did, only I could have done it more quickly and efficiently.

I don't pretend to be able to offer a solution to California's problems, other than to note that meaningful change will require self-discipline, common sacrifice, and a willingness to acknowledge that those with viewpoints which differ from your own probably have some valid points. Ranting about "liberal tax and spend democrats" or about "no taxation with representation republicans" is not going to solve our problems.

I don't see too much willingness to engage in intelligent conversation with political/philosophical opposites here in OC. I do hear people singing (to the music of "This Land is Your Land"): "This land is my land, this land is my land; get off of my land, go find your own land......." Sadly, such singing takes place all across the political spectrum.
7.14.2009 7:02pm
ShelbyC:

I wouldn't join a country club with low dues if it meant that the swimming pool wasn't maintained and the grass wasn't mowed. I wouldn't buy a condominium unit if the organization was not collecting enough dues to keep adequate reserves for expected building maintenance. Taxes are the dues we pay to live in civilized society. If more taxes mean better schools, better roads, better police and fire protection, better parks, and so forth, I'm happy to pay my dues. The California budget crisis means that the citizens of California need to raise the dues of California membership.


Why does it mean that and not that spending needs to be lowered?
7.14.2009 7:07pm
rosetta's stones:
Lake Meade gets its water by damming up the Colorado River, which would flow on through California and into Mexico of its own accord, were it not for Hoover Dam which was paid for by US taxpayers, along with many billions of dollars of other water management projects that make California green, as a part of the water welfare the rest of us fork over to commie California.

Fixed it for you.


Perhaps Colorado could damn it up and sell the water to Nevada and Arizona?

I'm all for that. No more water welfare to California is fine by me.


Santa Barbara has an (expensive) desalination plant it could crank up and use to sell water to its residents. For a small, wealhty town like SB, that's do-able. For Los Angeles and the millions upon millions in its suburban area, that's going to be a lot tougher.

Precisely. Absent US taxpayer welfare payments, California would be parched, or they'd have to pay their own way.

Hey, I'm not ranking on Cali specifically, as there's plenty of illicit welfare transfers in this country. I'm just pointing this out in response to a previous poster claiming that Cali is a net contributor of tax base. The reality is something other than that, if we dig into the transfer payments, I suspect, and water is one of those transfers.
7.14.2009 7:08pm
A. Zarkov (mail):
Toby:

"All of this says little more than you get more of whatever you subsidize. Politically, California has been unwilling to resis the impusle to subsidize all of the behavior above in the attempt to buy votes for the long term."

Californians passed Proposition 187 in 1994, which would have denied those social services to illegal aliens and saved the state a lot of money. But federal courts struck it down. So it's incorrect to say that politically Californians were unwilling to resist the impulse to subsidize. Quite the opposite.
7.14.2009 7:22pm
Andy Freeman (mail):
> more taxes mean better schools, better roads, better police and fire protection, better parks, and so forth, I'm happy to pay my dues.

Ignoring "and so forth", what if more taxes don't "mean better schools, roads, better police and fire protection"?

Is there the slightest possibility that "and so forth" includes non-essentials and that those non-essentials are largely responsible for the deficit?
7.14.2009 7:59pm
Anthony A (mail):
California is already broken up. Into 58 counties, which collect and spend most of the taxes and are more independent of state government than counties are in most other states. Some consider them to be like little states unto themselves.

This is not entirely true, and that's actually a big part of the budget problem. Most of local government's (espeically school district) budgets are recycled through the state, but the state doesn't have much control over how those localities spend the money. The state can't mandate salary cuts for local-government employees, even when state funding pays for those salaries. Right now, the state could fire every single state employee and the budget might still be out of balance. That imbalance between funding and spending is at least as responsible for budget problems as Prop 98 (which mandates ever-increasing school spending).
7.14.2009 7:59pm
byomtov (mail):
No, I'm not an idiot, and I'm only lecturing you on basic statistical analysis because you appear to need lecturing on it. When you find yourself 8.2% off the mean, that is statistically significant. It's you who's playing semantics with "excessive", not me.

No. I don't. In fact, your latest comment itself demonstrates my point. You claim that 8.2% above the mean is excessive. OK. But that has zero to do with whether a state is number 6 or number 11, or number 1.

My entire point was that using rankings by themselves to determine what is excessive is silly. That shouldn't be hard to understand.
7.14.2009 8:43pm
A. Zarkov (mail):
Let's say that the average across states for income tax is 10% of adjusted gross income (just to pick an easy number). This would be an average of percentages, meaning you add all the percentages and divide by 50. In this case we take an average to get the typical tax burden. Of course if half the states had 20% and half 0% then that 10% would not be so typical. The point being that the average does not necessarily give you something typical.

Now let's suppose California had a tax 20% tax of adjusted gross income which clearly means that California's tax burden is double the typical burden in other states. We wouldn't say California's tax burden is 10% higher would we? That would be deceptive. Usually we would say it's "100%" higher.

On the other hand, byomtov is completely correct about rankings. Being top ranked does not necessarily make you an outlier.
7.14.2009 9:34pm
rosetta's stones:
My entire point was that using rankings by themselves to determine what is excessive is silly. That shouldn't be hard to understand.

If that's your point, then you don't have much of a point.

No matter your continued protestations, a proper statistical analysis will include a rank order of all 50 states. It also includes other forms of analysis, but it would be extremely unlikely that in our rank order analysis, we'll find the top 6 of those 50 states in statistical alignment with the mean, on almost any subject, good or bad. This case confirms that thinking, as we see that there is no alignment, and a clear statistical departure confirms our rank order analysis.

Are you just scrambling for an escape here, or scrambling for some basis to support those excessive tax rates, or what?
7.14.2009 10:26pm
DiversityHire:

California's problem is not its size, it's the government and proposition system.


I think you're right: that the government is broken, that the proposition system, 2/3 rule, gerrymandering, etc., have contributed to this problem. But the underlying problem is size: we don't know how to govern groups/organizations as large as California. The best we can do is divide, layer, and hope for the best. The state government apparatus is not working for 30+ million californians or the 300+ million americans who benefit from and support the state.

California is a failure as a viable political entity, but it is still the crown jewel of American states, with great natural and human resources. The problem before it is how to create a viable state that fairly services its residents in a predictable, stable manner.

As it stands, California is a great place to be very wealthy and a good place to be poor (if you have to be poor). Its a bad place to be middle class, and a terrible place to be upwardly mobile. Education, transportation, and land use in the state are sub-par, unfairly distributed, and so far out of the control of individual residents as to seem mystical in their origins.

Since I've lived here, I've marveled at the continued belief in the efficacy of government in the face of consistent under-performance. I don't think a sizable majority is about to demand subdivision, the only way it could come about is through continued stalemate; the state, unable to borrow, would be forced to go to the federal government, at that point a restructuring could be effected to the benefit of californians and the rest of the country.
7.14.2009 10:42pm
second history:
Lake Meade (sic) gets its water by damming up the Colorado River, which would flow on through California and into Mexico of its own accord, were it not for Hoover Dam which was paid for by US taxpayers, along with many billions of dollars of other water management projects that make California green, as a part of the water welfare the rest of us fork over to commie California.

Fixed it for you.


So I guess the you (and the country) would have gladly endure higher food prices and reduced industrial output in exchange for not supporting water projects in California and the West. California produces 98 percent (see page 20) of 79 different crops and livestock. In 2007 exports of California crops and livestock was valued at $10.7 billion, and generated gross farm income of $36 billion, or 12% of the US total.

California represents around 12% of the entire US economy. Whatever happens in California, so goes the US. If those in the "flyover" states (which get far more back in federal funding than they send to Washington), want to succeed, they better hope California succeeds as well.
7.15.2009 12:14am
Brian K (mail):
California has been largely insulated from foot-voting pressure because of its huge size, and the way in which it monopolizes most of the desirable parts of the US West Coast. Because of these geographic advantages,

so in other words, people refuse to leave because they find it so "desirable" that they'd still rather live there than anywhere else despite its political problems. i fail to see how this is a problem with the vote with your feet theory, unless of course you assume everyone should/will act the way you want them to.
7.15.2009 1:09am
rosetta's stones:
So I guess the you (and the country) would have gladly endure higher food prices and reduced industrial output in exchange for not supporting water projects in California and the West. California produces 98 percent (see page 20) of 79 different crops and livestock. In 2007 exports of California crops and livestock was valued at $10.7 billion, and generated gross farm income of $36 billion, or 12% of the US total.

Sounds good. The Cali commies can afford to pay for their own water, then, and the US taxpayers shouldn't have to continue paying water welfare to them.

And, we can quit paying ag welfare to them, as well. No subsidies. No nothing. They can do without it, as your statistics appear to indicate.



California represents around 12% of the entire US economy. Whatever happens in California, so goes the US. If those in the "flyover" states (which get far more back in federal funding than they send to Washington), want to succeed, they better hope California succeeds as well.

You make the absurd claim that other states get far more back in federal funding, but you provide nothing to support your absurd claim. That is the root of the discussion re the water welfare issue I brought up, which is just one example of the welfare transfer payments commie Cali sucks out of US taxpayers, in contradiction to your absurd claim.

Believe me, Cali don't matter to the rest of the country. It could fall into the Pacific for all we care. If Cali wants to succeed, I'd suggest it first start by taking care of their own internal problems, decades long problems, and quit tapping into the rest of our pockets, especially while bleating that they're not tapping into our pockets.
7.15.2009 9:02am
rosetta's stones:
And just to be clear, there is no net cost to the US taxpayers if we cut off water welfare to commie Cali. Any Cali ag production will be made up elsewhere, in locales that actually survive without US taxpayer funded water welfare. We save the up-front welfare cost, plus we have the satisfaction of removing people from the welfare dole, which is always a good thing, in and of itself.
7.15.2009 9:07am
rosetta's stones:
Oh and one more Cali welfare story for you. In the recent automotive bailout packages, a recently-vintaged Cali auto startup suddenly required a bailout... $1/2B worth of bailout.

So commie Cali's fledgling auto industry requires a little welfare, eh? What a flippin' joke.

I shoulda thought of that one. Do an IPO, pay off a few senators, and watch the cash roll in. Absolutely brilliant. Yep, Cali has much to teach us.
7.15.2009 9:18am
loki13 (mail):
I check in on this thread and find, much to my surprise, that rosetta's stones is outdoing himself by insulting other posters and throwing around "commie" (at least it's not statist or collectivist today) like the words are going out of fashion. Which, if words were natural resources, they would be given RS's current rate of use.

But he's right. Commie California doesn't do anything for the United States. It has no important industries for us. It's not like, with our manufacturing base hollowed out, that the United States uses cultural exports and soft power. And California has no cultural exports to speak of. Hollywood? Never heard of it.

Nor is there any critical mass of agricultural industries there. I mean- that's so Grapes of Wrath. Oklahoma's not a dustbowl anymore! A proud American like RS will be eating his Okie fruits and Veggies while drinking a nice Tulsa Pinot Noir.

California also has nothing to do with out national defense. We have never had, nor will we ever have, any important military bases, or, more importantly, military contractors or defense/aerospace firms based in California.

Heck, everyone knows that it's impossiblee to start anything in California. That's why nothing is ever started in Silicon Valley. California no world-class firms there that are the envy of the world.

(As for "commie transfer payments" the Fed. Tax Institute -- hardly a left wing site -- puts California as one of the largest outflow states. Not as large as NJ (top), Minnesota, NH, or Indiana, but right up there...)
7.15.2009 12:00pm
David G (mail):
I think the best solution would be to just hand the whole state back to Mexico under the Constitution's buyer's remorse provision.
7.15.2009 2:08pm
second history:
RS sez:

You make the absurd claim that other states get far more back in federal funding, but you provide nothing to support your absurd claim. That is the root of the discussion re the water welfare issue I brought up, which is just one example of the welfare transfer payments commie Cali sucks out of US taxpayers, in contradiction to your absurd claim.

Aside from the juvenile name calling, here is the source of the "absurd claim". According to the Tax Foundation, the top 20 states in 2005 that received more in federal spending than they pay in taxes are:

New Mexico ($2.03 in federal spending for every $1 in taxes), Mississippi ($2.02), Alaska ($1.84), Louisiana ($1.78 ), West Virginia ($1.76), North Dakota ($1.68).
Alabama ($1.66), South Dakota ($1.53), Kentucky ($1.51),
Virginia ($1.51), Montana ($1.47), Hawaii ($1.44),
Maine ($1.41), Arkansas ($1.41), Oklahoma ($1.36)
South Carolina ($1.35), Missouri ($1.32), Maryland ($1.30), Tennessee ($1.27), and Idaho ($1.21).

In contrast, California ranked 43rd, receiving 78 cents for every federal tax dollar.

For detailed data for the period 1981-2005, see here.
7.15.2009 2:20pm
loki13 (mail):
Two corrections-

It was not the Fed. Tax Institute, it was the Tax Foundation, cited supra by second history.

Second, I apologize for my snarkiness. I could have made the same points without the extraneous commentary and sarcasm.
7.15.2009 2:44pm
second history:
I don't know, loki13, I don't see the need to apologize for anything. Your tone is fully justified in reply to RS. I thought it was a great post.
7.15.2009 2:58pm
rosetta's stones:
As for "commie transfer payments" the Fed. Tax Institute -- hardly a left wing site -- puts California as one of the largest outflow states. Not as large as NJ (top), Minnesota, NH, or Indiana, but right up there...)

Uh huh, and does that include the water welfare, both today's and the massive investment of yesteryear? Does it include the $1/2B for that automotive juggernaut that started up 15 minutes ago, and has yet to sell a vehicle, and likely never will?

Sorry if the term commie California offends you, loki, and if you're happy with California and celebrate it, that's wonderful. Unfortunately, the rest of us read the newspapers, and aren't celebrating your wonderment, and don't care if Cali drops off the map, and don't feel the need to have it strip cash out of our pockets to support it's profligate spending and socialist norms. Maybe commie Cali should just increase the graduations on their graduated income tax. From each according to their means, dontchayaknow.

I'd be perfectly fine if Cali goes over to Mexico. We'll keep the ports and other federal lands, and all of the federal offshore mineral rights, cut off the welfare water, and you can have at it out there in the workers' paradise. But you be careful where you're standing, as you might be run over in the depopulation stampede.

Heck, if Obama holds the checkbook back, you might be run over anyway.
7.15.2009 4:13pm
rosetta's stones:
You be as snarky as you'd like, loki, and I don't even take back my compliments re your post in that other discussion. Just keep your hands off my wallet.
7.15.2009 4:18pm
second history:
Speaking of socialist states, certainly Alaska is the most socialist. Alaska received nearly $2 in federal spending for every dollar in federal taxes in 2005 (source: Tax Foundation, see above). In 2002, one-third of Alaska's jobs were tied to federal spending. In 2009, Alaska was again the No. 1 recipient of pork spending per capita, at $322 per person (Alaska has been No. 1 for years, while California was ranked No. 49 at $15.26 per person.)

As part the People's Republic of Alaska (PRA), the state owns the oil resources, not private business. Alaskan wealth comes at the expense of drivers in the lower 48. Even then the PRA imposes a confiscatory 25% tax on each barrel and redistributes the wealth to every Alaskan, whatever their contribution (or lack thereof) to society. Talk about spreading the wealth around.
7.15.2009 5:12pm
Melancton Smith:
Let's do the math:

CA has population of 36,756,666
at $15.26/person = $560,906,723.16
AK has population of 686,293
at $322/person = $220,986,346.00

This means that the residents of the entire 50 states spend over 2x as much supporting CA as they do AK.
7.16.2009 9:16am
rosetta's stones:
Fun with numbers, yes. Be careful, however. Revenues are easily enough calculated, and while we can and sometimes should jack with the raw data on revenues from individual states, the raw data itself is pretty useful.

Fed spending back to individual states is another matter. It's not quite so easily calculated... and the water management cash spent in this country is one obvious example of that... and why I chose it in this case.

Military bases and spending are another. Regulatory implications of fed actions are still another (implied costs and avoidance of implied costs are related to spending, yes). Bailouts of recent vintage yet another. All this spending is "below the line" and perhaps absent from a raw rank order of fed spending by state, but it is real spending, make no mistake, even if far more difficult to discretely analyze than is revenues. We can go on and on, but let it be known that real fed spending level is allocated based upon political power, and it will tend to be balanced out by that political power, as would be intuitively obvious.

This all isn't meant to rank on fed spending in commie Cali, or igloo-living Alaska, or any other state. Not until they start demanding more, that is.
7.16.2009 11:15am

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