We’ll start with projections over the next three decades for taxes and spending, measured as a share of economic output (gross domestic product). As you can see, the tax burden is increasing, but the spending burden is increasing even faster.
By the way, some people think America’s main fiscal problem is the gap between the two lines. In other words, they worry about deficits and debt.
But the real problem is government spending. And that’s true whether the spending burden is financed by taxes, borrowing, or printing money.
So why is the burden of government spending projected to get larger?
As you can see from Figure 2-2, entitlement programs deserve the lion’s share of the blame. Social Security spending is expanding as a share of GDP, and health entitlements (Medicare, Medicaid, and Obamacare) are expanding even faster.
Now let’s confirm that the problem is not on the revenue side.
As you can see from Figure 2-7, taxation is expected to consume an ever-larger share of economic output in future decades. And that’s true even if the Trump tax cuts are made permanent.
Having shared three charts from CBO’s report, it’s now time for a chart that I created using CBO’s long-run data.
My chart shows that America’s main fiscal problem is that we are not abiding by fiscal policy’s Golden Rule. To be more specific, the burden of government is projected to grow faster than the economy.
President Biden c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear Mr. President,
Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.
“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!
Washington Could Learn a Lot from a Drug Addict
Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?
Making more dependent on government is not the way to go!!
Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.
Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.
Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.
Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.
It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.
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Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”
How sad it is that liberals just don’t get this reality.
While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”
Alexander Fraser Tytler, Lord Woodhouselee(15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”
[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor.— TGW]
To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.
[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]
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Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.
_____________
_________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733
We got to act fast and get off this path of socialism. Morning Bell: Welfare Spending Shattering All-Time Highs Robert Rector and Amy Payne October 18, 2012 at 9:03 am It’s been a pretty big year for welfare—and a new report shows welfare is bigger than ever. The Obama Administration turned a giant spotlight […]
We need to cut Food Stamp program and not extend it. However, it seems that people tell the taxpayers back home they are going to Washington and cut government spending but once they get up there they just fall in line with everyone else that keeps spending our money. I am glad that at least […]
Government Must Cut Spending Uploaded by HeritageFoundation on Dec 2, 2010 The government can cut roughly $343 billion from the federal budget and they can do so immediately. __________ Liberals argue that the poor need more welfare programs, but I have always argued that these programs enslave the poor to the government. Food Stamps Growth […]
Milton Friedman – The Negative Income Tax Published on May 11, 2012 by LibertyPen In this 1968 interview, Milton Friedman explained the negative income tax, a proposal that at minimum would save taxpayers the 72 percent of our current welfare budget spent on administration. http://www.LibertyPen.com Source: Firing Line with William F Buckley Jr. ________________ Milton […]
Dan Mitchell Commenting on Obama’s Failure to Propose a Fiscal Plan Published on Aug 16, 2012 by danmitchellcato No description available. ___________ After the Welfare State Posted by David Boaz Cato senior fellow Tom G. Palmer, who is lecturing about freedom in Slovenia and Tbilisi this week, asked me to post this announcement of his […]
Is President Obama gutting the welfare reform that Bill Clinton signed into law? Morning Bell: Obama Denies Gutting Welfare Reform Amy Payne August 8, 2012 at 9:15 am The Obama Administration came out swinging against its critics on welfare reform yesterday, with Press Secretary Jay Carney saying the charge that the Administration gutted the successful […]
Thomas Sowell – Welfare Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. The Continuing Good News About Welfare Reform By Robert Rector and Patrick Fagan, Ph.D. February 6, 2003 Six years ago, President Bill Clinton signed legislation overhauling part of the nation’s welfare system. […]
Uploaded by ForaTv on May 29, 2009 Complete video at: http://fora.tv/2009/05/18/James_Bartholomew_The_Welfare_State_Were_In Author James Bartholomew argues that welfare benefits actually increase government handouts by ‘ruining’ ambition. He compares welfare to a humane mousetrap. —– Welfare reform was working so good. Why did we have to abandon it? Look at this article from 2003. In the controversial […]
Thomas Sowell If the welfare reform law was successful then why change it? Wasn’t Bill Clinton the president that signed into law? Obama Guts Welfare Reform Robert Rector and Kiki Bradley July 12, 2012 at 4:10 pm Today, the Obama Department of Health and Human Services (HHS) released an official policy directive rewriting the welfare […]
I have been writing President Obama letters and have not received a personal response yet. (He reads 10 letters a day personally and responds to each of them.) However, I did receive a form letter in the form of an email on July 10, 2012. I don’t know which letter of mine generated this response so I have […]
The people of Chile elected a Bernie Sanders-style leftist last December and one of his crazy ideas is a wealth tax. In a discussion with Axel Kaiser, I explain why this destructive levy is misguided.
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A wealth tax would be bad news in Chile. It also would be bad news in the United States.
Indeed, there is no country in the world where it wouldn’t be bad news (including Switzerland).
The chart shows that the severity of the tax variesdepending on the rate of wealth tax and the change in the value of a taxpayer’s assets.
And it only includes the impact of the wealth tax and personal income tax.
Yet even with that limitation, it is still very easy to wind up with effective tax rates of more than 100 percent.
You don’t need to be a wild-eyed supply-sider to conclude this will undermine growth by discouraging people from saving and investing.
Daniel Savickas of the Taxpayer Protection Alliance wrote about this unfair and punitive levy earlier this year.
Here are excerpts from his column for Real Clear Markets.
A wealth tax means it would no longer be worthwhile for many to invest in the economy. People invest with the hopes of making money on that investment and accept they will have to pay a percentage on gains once it’s sold off. However, with repeated taxes in the interim just for holding the stock,many investments cease making financial sense. As a result, many startup companies will end up losing access to capital at a critical time. A wealth tax will end up punishing small businesses more so than the super wealthy. …The economy has taken a beating lately and – given recent inflationary trends – does not seem to be getting a break any time soon. Policymakers should be focusing on how to alleviate those pains. A wealth tax would go after the people who take risks and invest their money in our companies and our jobs. This approach would never be helpful, but is especially harmful at a time like this.
P.S. There’s definitely not a libertarian argument for a wealth tax, and I also have explained why there is not a conservative argument for this invasive levy.
Let’s look today at the wonky issue of “book income” because it’s an opportunity to point out that there are three types of leftists.
Honest leftists who understand economics and recognize tradeoffs (I think of them as “Okunites“).
Dishonest leftists who understand economics but pretend that tradeoffs don’t exist (the “demagogues“).
Leftists who have no idea what they’re saying or thinking (I think of them as, well, Joe Biden).
I’m being snarky about the President because of this recent tweet, which contains a couple of big, glaring mistakes.
What are the mistakes (I’m not calling them lies because I don’t think Biden has the slightest idea that he is wrong, much less why he’s wrong).
The first mistake is that corporations pay a lot of tax (payroll tax, property tax, etc) even if they are losing money and don’t owe any corporate income tax.
The second mistakes is that Biden is relying on a report about corporate income taxes that has been debunkedbecause it relied on book income rather than taxable income.
The third mistake is that the President implies that his plan force all big companies to pay the corporate tax when that’s obviously not true.
Regarding that third mistake, Kyle Pomerleau of the American Enterprise Institute explains why there will still be companies paying zero corporate income tax.
While the Biden administration’s proposals would increase the tax burden on corporations by about $2 trillion over the next decade, they would not change the basic structure of the corporate income tax. The Democrats’ proposal would not end corporations paying zero federal income tax in certain years.Corporations will still be able to carryforward losses, and credits will still be available for corporations to offset their tax liability. The administration has proposed a minimum tax to address these headlines by tying federal tax liability to book income. The minimum tax would require corporations with net income over $2 billion to pay the greater of their ordinary corporate tax liability or 15 percent of their book or financial statement income. Corporations would still be able to offset the book minimum tax with losses and general business credits.
Glenn Kessler of the Washington Post tried to defend Biden’s tweet as part of his misnamed “Fact Checker.”
He had to acknowledge Biden was using a made-up number, but nonetheless concluded that the President’s assertion was “probably in the ballpark.”
This is one of Biden’s favorite statistics. …the president has used it in speeches or interviews 10 times since April. Normally he is careful to refer to “federal income taxes” so the tweet is little off by referring just to “taxes.” …Let’s dig into this statistic. It’s not necessarily wrong but there are some limitations. …The number comes from…the left-leaning Institute on Taxation and Economic Policy (ITEP). …Company tax returns generally are not made public, so ITEP’s numbers are the product of its own research and analysis of public filings. But it is an imperfect measure. …the information in the filings may not reflect what is in the tax returns. …Nevertheless, the notion that 10 to 20 percent of Fortune 500 companies do not pay federal income taxes is consistent with a 2020 report by the nonpartisan Joint Committee of Taxation. …This “55 corporations” number is probably in the ballpark.
For what it’s worth, I don’t care that Kessler gave Biden a pass for writing “taxes” instead of “federal income taxes.”
After all, that’s almost surely what he meant to write (just like Trump almost surely meant “highest corporate tax rate” when complaining about America being the “highest taxed nation”).
But I’m not in a forgiving mood about the rest of Biden’s tweet (or Kessler’s biased analysis) for the simple reason that there is zero recognition that companies occasionally don’t pay tax for the simple reason that they sometimes lose money.
Dan Mitchell on Corporate Tax Rates and the Laffer Curve
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At the risk of understatement, I represented a minority viewpoint in the documentary. Most of the people interviewed had a negative view of tax competition, considering it to be (as suggested by the title) a “race to the bottom.”
For purposes of today’s column, though, I want to focus on the narrower issue of the relationship between corporate tax rates and corporate tax revenue.
In the above video, I asserted that lower rates did not result in lower revenue. Indeed, I even made the bold statement that revenues increased.
Is that correct?
Fortunately, I don’t need to do any elaborate calculations to prove my point. I’ll simply direct readers to the work of two left-leaning international bureaucracies.
Back in 2017, I cited an article form the International Monetary Fund that included a graph clearly illustrating that the drop in tax rates has not been accompanied by a drop in tax revenue.
This was a remarkable admission considering that the article argued in favor of higher tax burdens.
Likewise, last year I cited a study from the Organization for Economic Cooperation and Development that also acknowledged that falling tax rates on companies did not translate into lower revenues.
Given that the OECD has a big project to increase business tax burdens, that also was a startling admission.
None of this means, by the way, that lower rates always lead to more revenue.
Indeed, most tax cuts cause revenue to decline (though not as much as predicted by static estimates).
Needless to say, I was right. Not that this required any special insight. After all, no nation has ever taxed its way to prosperity.
We’re now at the end of 2012 and Portugal is still saddled with a weak economy. And the higher taxes haven’t resulted in less red ink. Indeed, according to the Economist Intelligence Unit, government debt has jumped from 93 percent of GDP in 2010 to 124 percent of GDP this year.
Why did higher taxes backfire in Portugal? For the same reasons that higher taxes have failed in Greece, Spain, Bulgaria, France, Italy, the United Kingdom, and so many other nations.
Higher taxes undermine incentives for productive behavior, thus reducing an economy’s potential for growth. This means less economic output, which also means a smaller tax base. This Laffer Curve effect doesn’t necessarily mean less revenue, but it certainly means that tax increases rarely raise as much money as initially projected.
Higher taxes usually are a substitute for the real solution of spending restraint (i.e., Mitchell’s Golden Rule). Politicians oftentimes refuse to reduce the burden of government spending because of an expectation of additional tax revenue. Heck, in many cases, higher taxes trigger an increase in the size and scope of the public sector.
So did Portugal learn any lessons from this failed experiment in Obamanomics?
Hardly. Indeed, the government plans to double down on this approach – even though it’s increasingly apparent that higher tax burdens won’t translate into much – if any – additional tax revenue. Here are some excerpts from a report in the Financial Times.
Lisbon plans to lift income tax revenue by more than 30 per cent, raising the effective average rate by more than a third from 9.8 to 13.2 per cent. Anyone receiving more than the minimum wage of €485 a month, including pensioners, will also pay an extraordinary tax of 3.5 per cent on their income. …the steep tax increases facing many families have made the outlook for 2013 – the third consecutive year of austerity, recession and rising unemployment – the grimmest yet. Total tax revenue has fallen considerably below target this year, forcing the government to implement additional austerity measures… The coalition will be relying on increased state revenue to account for about 80 per cent of the fiscal adjustment required in 2013 – a reversal of the original bailout plan, in which consolidation was to be achieved mainly through spending cuts.
Amazing. The government imposes huge tax hikes, which don’t generate any positive results. Yet even though “tax revenue has fallen considerably below target,” confirming that there are significant Laffer Curve issues, the government chooses to repeat the snake-oil fiscal therapy of higher taxes.
Anybody want to guess what’s going to happen? The answer, of course, is that this will further dampen incentives to generate income and comply with the government’s fiscal demands.
The latest increases have stretched the tax system to the limit, says Carlos Loureiro, a tax partner at Deloitte. “The current model is exhausted. We need to do something different,” he says. “Any further increase in tax rates is unlikely to result in increased revenue.” Income from value added tax, the government’s biggest source of tax revenue representing about 36 per cent of the total, has been falling since 2008, despite a sharp increase in the rate – the main rate is now 23 per cent. Both the government and the European Commission have acknowledged the risks of depending on increased tax revenue, which is more growth sensitive, to meet fiscal targets and contingency spending cuts amounting to 0.5 per cent of national output have prepared in case of another tax shortfall.
I almost want to laugh at the part of the excerpt which notes that tax revenue “has been falling…despite a sharp increase in the rate.”
Maybe it’s time for these fiscal pyromaniacs to realize that revenues might be falling because rates are higher. In other words, Portugal not only isn’t at the ideal point on the Laffer Curve (collecting the amount of revenue needed to finance legitimate activities of government), it may even be past the revenue-maximizing part of the curve.
The one thing we can state with certainty, though, is that Portugal’s fiscal problem is too much government spending. The failure to address this problem then leads to very unpleasant symptoms, such as lots of red ink and self-destructive class-warfare tax policy.
This video explains the relationship between tax rates, taxable income, and tax revenue. The key lesson is that the Laffer Curve is not an all-or-nothing proposition, where we have to choose between the exaggerated claim that “all tax cuts pay for themselves” and the equally silly assumption that tax policy doesn’t effect the economy and there is never any revenue feedback. From http://www.freedomandprosperity.org 202-285-0244
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Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
(Emailed to White House on 12-21-12.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on […]
(Emailed to White House on 12-21-12.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is […]
(Emailed to White House on 12-21-12) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get a pulse on what is […]
The federal government has a spending problem and Milton Friedman came up with the negative income tax to help poor people get out of the welfare trap. It seems that the government screws up about everything. Then why is President Obama wanting more taxes? _______________ Milton Friedman – The Negative Income Tax Published on […]
I was sad to read that the Speaker John Boehner has been involved in punishing tea party republicans. Actually I have written letters to several of these same tea party heroes telling them that I have emailed Boehner encouraging him to listen to them. Rep. David Schweikert (R-AZ),Justin Amash (R-MI), and Tim Huelskamp (R-KS). have been contacted […]
Michael Tanner of the Cato Institute in his article, “Hitting the Ceiling,” National Review Online, March 7, 2012 noted: After all, despite all the sturm und drang about spending cuts as part of last year’s debt-ceiling deal, federal spending not only increased from 2011 to 2012, it rose faster than inflation and population growth combined. […]
Michael Tanner of the Cato Institute in his article, “Hitting the Ceiling,” National Review Online, March 7, 2012 noted: After all, despite all the sturm und drang about spending cuts as part of last year’s debt-ceiling deal, federal spending not only increased from 2011 to 2012, it rose faster than inflation and population growth combined. […]
Some of the heroes are Mo Brooks, Martha Roby, Jeff Flake, Trent Franks, Duncan Hunter, Tom Mcclintock, Devin Nunes, Scott Tipton, Bill Posey, Steve Southerland and those others below in the following posts. THEY VOTED AGAINST THE DEBT CEILING INCREASE IN 2011 AND WE NEED THAT TYPE OF LEADERSHIP NOW SINCE PRESIDENT OBAMA HAS BEEN […]
I hated to see that Allen West may be on the way out. ABC News reported: Nov 7, 2012 7:20am What Happened to the Tea Party (and the Blue Dogs?) Some of the Republican Party‘s most controversial House members are clinging to narrow leads in races where only a few votes are left to count. […]
Rep Himes and Rep Schweikert Discuss the Debt and Budget Deal Michael Tanner of the Cato Institute in his article, “Hitting the Ceiling,” National Review Online, March 7, 2012 noted: After all, despite all the sturm und drang about spending cuts as part of last year’s debt-ceiling deal, federal spending not only increased from 2011 […]
I’ve written manytimes about the importance of low tax rates, specifically low marginal tax rates on productive activity such as work, saving, investment, and entrepreneurship.
And I’ve explained that it is especially beneficial to have low tax burdens to attract people who play a big role in boosting economic growth.
The bottom line is that everyone should want their state or their country to be a magnet for the best and brightest.
Having more highly successful people is a great shortcut for boosting everyone’s income.
Today, we’re going to look at more evidence on this topic. In a working paper for the Harvard Business School, Sari Pekkala Kerr, Çağlar Özden, William Kerr, and Christopher Parsons examine the migratory patterns of highly skilled workers.
Highly skilled workers play a central and starring role in today’s knowledge economy. Talented individuals make exceptional direct contributions—including breakthrough innovations and scientific discoveries… The exceptional rise in the number of high-skilled migrants to OECD countriesis the result of several forces, including increased efforts to attract them by policymakers as they recognize the central role of human capital in economic growth… For example, immigrants account for some 57 percent of scientists residing in Switzerland, 45 percent in Australia, and 38 percent in the United States (Franzoni et al. 2012). In the United States, 27 percent of all physicians and surgeons and over 35 percent of current medical residents were foreign born in 2010. …the global migration rate of inventors in 2000 stood at 8.6 percent, at least 50 percent greater in share terms than the average for high-skilled workers as a whole.
In the contest to attract skilled migrants, some nations do a better jobs than others.
…among OECD destinations, the distribution of talent remains skewed. Four Anglo-Saxon countries—the United States, the United Kingdom, Canada and Australia—constitute the destination for nearly 70 percent of high-skilled migrants (to the OECD) in 2010. The United States alone has historically hosted close to half of all high-skilled migrants to the OECD and one-third of high-skilled migrants worldwide.
Here’s a chart looking specifically at inventors.
So why do some nations get disproportionate numbers of skilled migrants.
As you might suspect, these highly productive people want to earn more money. And keep more money.
The core theoretical framework for studying human capital flows dates back to at least John Hicks (1932), who noted that “differences in net economic advantages, chiefly differences in wages, are the main causes of migration.” …the United States has a very wide earnings distribution and low tax levels and progressivity, especially compared to most source countries, including many high-income European countries. As a result, we can see why the United States would attract more high-skilled migrants, relative to low-skilled migrants and relative to other high-income countries.
Notice, by the way, that low-tax Singapore and low-tax Switzerland also are big winners in the above chart. Indeed, they may be ahead of the United States after adjusting for population.
Texas has better government policy than California, most notably in areas such as taxation and regulation.
Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.
Now let’s look at a bunch of evidence to support those three sentences.
We’ll start with an article by Joel Kotkin of Chapman University.
If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.
Next we have some business news from the San Francisco Chronicle.
Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.
Not according to this column by Hank Adler in the Wall Street Journal.
California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.
The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.
But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).
Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).
Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.
Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.
…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.
California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.
Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).
Sadly, these high taxes don’t translate into good services from government.
The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.
Makes you wonder whether the rest of the nation should copy that model?
Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.
Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.
But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.
Here’s some of what he wrote in his column earlier this month for the New York Times.
I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?
Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).
But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”
That’s actually a big reason for the state’s decline, not a “bright spot.”
I’m not the only one to recognize the limitations of his column.
Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.
I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.
Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.
Let’s conclude with some levity.
Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.
Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.
So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.
With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.
Here are some excerpts from a report by CNN Money on rapid population growth in Texas.
More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.
But why is the population growing?
Well, CNN Money points out that low housing prices and jobs are big reasons.
And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.
But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.
Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.
That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.
But that wasn’t the only omission.
The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.
The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.
The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.
The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).
By the way, I’m not trying to argue that Texas is the best state.
Indeed, it only got the top ranking in one of the measures cited above.
My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.
At least compared to other states. And especially compared to the high-tax states that are stagnating.
Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.
Such as Illinois, as illustrated by this data and this Eric Allie cartoon.
P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.
P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.
California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]
We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]
I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better) is bragging […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
Former California Governor Arnold Schwarzenegger with his family I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]
John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]
___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]
___________ Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher. Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]
Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Back in 2020, I warned that then-Mayor Bill de Blasio was setting the stage for fiscal crisis.
During his eight years in office, he violated fiscal policy’s golden rule by increasing the burden of government spending at three times the rate of inflation.
But the pandemic accelerated the exodus, and that is turning a bad fiscal situation into a terrible fiscal situation for the new Mayor, Eric Adams.
Reporting for the New York Times, Nicole Hong and Matthew Haagwrite about how rich people (and their tax revenue) have been escaping New York City.
…roughly 300,000 New York City residents left during the early part of the pandemic… Now, new data from the Internal Revenue Service shows that the residents who moved to other states by the time they filed their 2019 taxes collectively reported $21 billion in total income, substantially more than those who departed in any prior year on record.…a potential loss that could have long-term effects on a city that relies heavily on its wealthiest residents to support schools, law enforcement and other public services. …The top 1 percent of earners, who make more than $804,000 a year, contributed 41 percent of the city’s personal income taxes in 2019. …The exodus to Florida was especially robust, and not just for the retiree crowd. …The pandemic accelerated the relocation of several New York-based financial firms to new offices or headquarters in Florida. …The Manhattan residents who moved to Palm Beach County had an average income of $728,351, IRS data showed.
So why pay lots of taxes when you get very little in return?
In a column last year for the New York Post, Nicole Gelinas warned about job losses in the financial industry.
…the city’s financial-industry jobs (not including real estate) were down 5 percent, to 338,800, compared with pre-COVID August 2019. Commercial-banking jobs are down 7 percent, to 67,300. Investment-related jobs are also down 7 percent, to 177,600. If we weren’t distracted by huge, double-digit percentage losses in other parts of the city’s economy, like arts and entertainment, these would be big numbers. …Some of this job destruction is a gain for other states. In Florida, financial jobs…are up 6 percent since August 2019, to 422,000. …yet another small investment firm, ARK, said it would close its New York headquarters and move…, with most of its dozens of workers going. …We used to fret about what happened when Wall Street crashed; now, we should fret that we have these woes when Wall Street hasn’t crashed.
When jobs are lost, that’s bad news for politicians because they miss out on tax revenue. And that’s true if jobs simply disappear and it’s true if the jobs move to low-tax states like Florida.
And it’s a big problem because Mayor Adams inherited a big mess. Simply stated, revenues are running away at the same time that spending is going up.
Emma Fitzsimmons wrote for the New York Timesthat the former Mayor’s legacy is a bloated city budget, which is connected to an ever-expanding bureaucracy.
Bill de Blasio will be remembered for many things…But one central element of his administration has received less attention: his passion for spending money. Under Mr. de Blasio, the city’s budget has soared to a record $102.8 billion,and the city work force rose to more than 325,000 employees, its highest level ever. His final budget, more than $25 billion higher than his first budget in 2014… Mr. de Blasio’s spending spree could create problems for Mr. Adams… The city work force…quickly began to rise…after Mr. de Blasio took office — pleasing the city’s municipal unions, some of which were major donors to the mayor’s political endeavors. …The increases to the city work force will create long-term costs for the city for health care, pensions and retiree benefits.
I can say “I told you so” because I warned that de Blasio was bad news when he was running for office in 2013.
Texas has better government policy than California, most notably in areas such as taxation and regulation.
Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.
Now let’s look at a bunch of evidence to support those three sentences.
We’ll start with an article by Joel Kotkin of Chapman University.
If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.
Next we have some business news from the San Francisco Chronicle.
Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.
Not according to this column by Hank Adler in the Wall Street Journal.
California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.
The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.
But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).
Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).
Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.
Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.
…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.
California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.
Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).
Sadly, these high taxes don’t translate into good services from government.
The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.
Makes you wonder whether the rest of the nation should copy that model?
Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.
Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.
But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.
Here’s some of what he wrote in his column earlier this month for the New York Times.
I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?
Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).
But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”
That’s actually a big reason for the state’s decline, not a “bright spot.”
I’m not the only one to recognize the limitations of his column.
Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.
I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.
Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.
Let’s conclude with some levity.
Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.
Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.
So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.
With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.
Here are some excerpts from a report by CNN Money on rapid population growth in Texas.
More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.
But why is the population growing?
Well, CNN Money points out that low housing prices and jobs are big reasons.
And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.
But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.
Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.
That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.
But that wasn’t the only omission.
The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.
The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.
The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.
The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).
By the way, I’m not trying to argue that Texas is the best state.
Indeed, it only got the top ranking in one of the measures cited above.
My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.
At least compared to other states. And especially compared to the high-tax states that are stagnating.
Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.
Such as Illinois, as illustrated by this data and this Eric Allie cartoon.
P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.
P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.
California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]
We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]
I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better) is bragging […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
Former California Governor Arnold Schwarzenegger with his family I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]
John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]
___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]
___________ Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher. Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]
Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
If you don’t want to spend a couple of minutes to watch the interview, the key takeaway is that California has lots of natural advantages, but the state is suffering from too much government.
I wrote about the state’s problems back in January, and I also addressed the link with California’s bad policy in columns in 2016 and 2020.
So instead of regurgitating some of my thoughts, let’s use today’s column to see what others have written.
For instance, Joel Kotkin wrote a very depressing assessment of California for Real Clear Investigations.
…most Californians, according to recent surveys, see things differently. They point to rising poverty and inequality, believe the state is in recession and that it is headed in the wrong direction. …Reality may well be worse… In a new report for Chapman University, my colleagues and I find California in a state of existential crisis, losing both its middle-aged and middle class, while its poor population faces dimming prospects.…Worse than just a case of progressive policies creating regressive outcomes, it appears California is descending into something resembling modern-day feudalism… California also suffers the widest gap between middle- and upper-middle-income earners of any state. …California lags all peer competitors – Texas, Arizona, Tennessee, Nevada, Washington and Colorado – in creating high wage jobs in fields like business and professional services… California’s “renewable energy” push has generated high energy prices and the nation’s least-reliable power grid… The state now ranks 49thin homeownership rate… California ranked 49th in the performance of poor, largely minority, students. …since 2000, California has lost 2.6 million net domestic migrants… In 2020, California accounted for 28 percent of all net domestic outmigration in the nation.
In a column for the Washington Examiner, Cole Lauterbach shares some of the findings from a new study published by the Hoover Institution.
A report studying business headquarter migration says California’s businesses are moving their centers of operations at a much higher rate in 2021 compared to previous years. …The authors use several different sources to track business migration out of the state,finding the number of companies who either announce or file that they’re in another state has risen sharply… The authors stress that the numbers are likely understated since smaller companies aren’t required to disclose a move. In their research, the authors found “high tax rates, punitive regulations, high labor costs, high utility and energy costs, and declining quality of life for many Californians which reflects the cost of living and housing affordability,” as reasons for the moves. …The most common destinations for states leaving California are Texas, Arizona and Nevada.
But let’s keep the focus on California’s overall problems.
Conor Friedersdorf, in an article for the Atlantic, offers a grim assessment of the Golden State.
This place inspires awe. If I close my eyes I can see silhouettes of Joshua trees against a desert sunrise; seals playing in La Jolla’s craggy coves of sun-spangled, emerald seawater; fog rolling over the rugged Sonoma County coast at sunset into primeval groves of redwoods that John Steinbeck called “ambassadors from another time.” …Yet I fear for California’s future.…the state’s leaders and residents shut the door on economic opportunity… Indeed, blue America’s model faces its most consequential stress test… the Institute for Justice, a public-interest law firm, released a report on barriers to work that disproportionately affect the middle and working classes. “California is the most broadly and onerously licensed state,” the report found, and is also “the worst licensing environment for workers in lower-income occupations.” …a survey of 383 CEOs by Chief Executive magazine, which weighed regulations and tax policy above all other metrics, ranked California the worst state for business, and Forbes ranked it among the worst for its high business costs and stifling regulatory environment.
Texas has better government policy than California, most notably in areas such as taxation and regulation.
Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.
Now let’s look at a bunch of evidence to support those three sentences.
We’ll start with an article by Joel Kotkin of Chapman University.
If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.
Next we have some business news from the San Francisco Chronicle.
Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.
Not according to this column by Hank Adler in the Wall Street Journal.
California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.
The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.
But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).
Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).
Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.
Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.
…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.
California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.
Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).
Sadly, these high taxes don’t translate into good services from government.
The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.
Makes you wonder whether the rest of the nation should copy that model?
Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.
Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.
But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.
Here’s some of what he wrote in his column earlier this month for the New York Times.
I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?
Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).
But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”
That’s actually a big reason for the state’s decline, not a “bright spot.”
I’m not the only one to recognize the limitations of his column.
Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.
I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.
Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.
Let’s conclude with some levity.
Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.
Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.
So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.
With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.
Here are some excerpts from a report by CNN Money on rapid population growth in Texas.
More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.
But why is the population growing?
Well, CNN Money points out that low housing prices and jobs are big reasons.
And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.
But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.
Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.
That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.
But that wasn’t the only omission.
The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.
The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.
The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.
The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).
By the way, I’m not trying to argue that Texas is the best state.
Indeed, it only got the top ranking in one of the measures cited above.
My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.
At least compared to other states. And especially compared to the high-tax states that are stagnating.
Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.
Such as Illinois, as illustrated by this data and this Eric Allie cartoon.
P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.
P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.
California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]
We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]
I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better) is bragging […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
Former California Governor Arnold Schwarzenegger with his family I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]
John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]
___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]
___________ Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher. Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]
Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Simply stated, free markets produce efficiency and lower costs while government produces inefficiency and higher costs.
So it was particularly galling that President Biden is engaging in demagoguery against oil companies. Peter Baker and Clifford Krauss of the New York Timesreport on a letter that he sent to some of their CEOs.
President Biden chastised some of the largest oil companies for profiteering off surging energy prices and “worsening that pain” for consumers…With the average price of gas in the United States topping $5 a gallon for the first time, Mr. Biden pointed the finger at energy firms in a letter to seven top executives… “At a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable,” Mr. Biden said in the letter.
The trade association for the oil industry got the chance to respond and noted that the federal government is hindering energy development.
Mike Sommers, president of the American Petroleum Institute, countered that the administration shared the blame for higher energy prices and called for approval of new drilling leases and approval of “critical energy infrastructure” like pipelines.
I’m sure the Biden Administration has not been helpful, but I want to make a bigger point.
If the President wants to know who “profiteers” from the energy industry, he should look in the mirror.
Courtesy of Wikipedia, here’s a chart of federal gas taxes over time.
But Uncle Sam is not the biggest profiteer.
Almost every state government grabs even more every time we fill up. Here’s a map from the Tax Foundation.
Texas has better government policy than California, most notably in areas such as taxation and regulation.
Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.
Now let’s look at a bunch of evidence to support those three sentences.
We’ll start with an article by Joel Kotkin of Chapman University.
If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.
Next we have some business news from the San Francisco Chronicle.
Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.
Not according to this column by Hank Adler in the Wall Street Journal.
California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.
The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.
But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).
Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).
Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.
Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.
…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.
California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.
Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).
Sadly, these high taxes don’t translate into good services from government.
The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.
Makes you wonder whether the rest of the nation should copy that model?
Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.
Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.
But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.
Here’s some of what he wrote in his column earlier this month for the New York Times.
I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?
Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).
But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”
That’s actually a big reason for the state’s decline, not a “bright spot.”
I’m not the only one to recognize the limitations of his column.
Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.
I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.
Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.
Let’s conclude with some levity.
Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.
Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.
So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.
With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.
Here are some excerpts from a report by CNN Money on rapid population growth in Texas.
More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.
But why is the population growing?
Well, CNN Money points out that low housing prices and jobs are big reasons.
And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.
But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.
Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.
That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.
But that wasn’t the only omission.
The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.
The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.
The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.
The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).
By the way, I’m not trying to argue that Texas is the best state.
Indeed, it only got the top ranking in one of the measures cited above.
My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.
At least compared to other states. And especially compared to the high-tax states that are stagnating.
Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.
Such as Illinois, as illustrated by this data and this Eric Allie cartoon.
P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.
P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.
California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]
We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]
I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better) is bragging […]
Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]
Former California Governor Arnold Schwarzenegger with his family I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]
John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]
___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]
___________ Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher. Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]
Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
During the Q&A session, I was asked to specify the ideal amount of government spending. I addressed that issue in an April interview while visiting Spain.
You’ll notice that I didn’t give a specific number in the above video. Just like I didn’t give a specific number to the audience in Uganda.
That’s because there is not an exact answer. The only thing we can definitively state is that government in most nations should be far smaller than it is today.
This is illustrated by the “Rahn Curve,” which I discussed both in the interview and in my speech today.
What is the Rahn Curve? Here’s some of what I wrote back in 2015.
…it shows the non-linear relationship between the size of government and economic performance. Simply stated, some government spending presumably enables growth by creating the conditions (such as rule of law and property rights) for commerce. But as politicians learn to buy votes and enhance their power by engaging in redistribution, then government spending is associated with weaker economic performance because of perverse incentives and widespread misallocation of resources.
And here’s a visual depiction of the Rahn Curve. The upward-sloping part of the curve shows that spending on genuine public goods is associated with more prosperity. But once government budgets exceed a certain level, additional spending means weaker economic performance.
In the above graph, I show that growth is maximized when government consumes about 15 percent-20 percent of economic output.
But I actually think prosperity would be maximized if government was a smaller burden, perhaps about 5 percent-10 percent of GDP.
In 2017, I explained the appropriate role of government in a libertarian society. My analysis was based on my “minarchist” views, which imply government only spends money for national defense and rule of law.
By contrast, my anarcho-capitalist friends would say we don’t need any government.
Meanwhile, moderate libertarians (or conservative Republicans) might be amenable to having state and local governments play a role in education and infrastructure.
The bottom line is that I think growth would be maximized if government consumes – at most – 10 percent of economic output (which was the size of government in the 1800s when the Western world became rich).
P.S. Here’s my response to a critic from the left.
P.P.S. Interestingly, some normally left-leaning international bureaucracies have acknowledged you get more prosperity with smaller government. Check out the analysis from the IMF, ECB, World Bank, and OECD.Thanks
Dan Mitchell does a great job explaining the Laffer Curve
Free-market economics meets free-market policies at The Heritage Foundation’s Tenth Anniversary dinner in 1983. Nobel Laureate Milton Friedman and his wife Rose with President Ronald Reagan and Heritage President Ed Feulner.
Since the passing of Milton Friedman who was my favorite economist, I have been reading the works of Daniel Mitchell and he quotes Milton Friedman a lot, and you can reach Dan’s website here.
Mitchell in February 2011.
Wikipedia noted concerning Dan:
Mitchell’s career as an economist began in the United States Senate, working for Oregon Senator Bob Packwood and the Senate Finance Committee. He also served on the transition team of President-Elect Bush and Vice President-Elect Quayle in 1988. In 1990, he began work at the Heritage Foundation. At Heritage, Mitchell worked on tax policy issues and began advocating for income tax reform.[1]
In 2007, Mitchell left the Heritage Foundation, and joined the Cato Institute as a Senior Fellow. Mitchell continues to work in tax policy, and deals with issues such as the flat tax and international tax competition.[2]
In addition to his Cato Institute responsibilities, Mitchell co-founded the Center for Freedom and Prosperity, an organization formed to protect international tax competition.[1]
President Biden c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear Mr. President,
I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980’s and it all came about as he said it would when Ronald Reagan’s tax cuts took place. I wish we would lower taxes now instead of looking for more revenue through raised taxes. We have to grow the economy:
Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit. He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.
Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”
The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt. Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate. And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues. Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).
That’s something called a documented fact. But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich. Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates. Liberals ignore reality, but it is simply true. It is a fact. It happened.
Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again. Which is exactly what Obama wants to do.
People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTERwho believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues. He too cut taxes, and he too increased tax revenues.
So we get to Ronald Reagan, who famously cut taxes. And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion). And again, the taxes were paid primarily by the rich:
“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”
So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other. And I can simply quote the New York Times AT the time:
WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.
A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.
Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.
Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.
The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”
The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.
And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: ”unexpected.” But it WASN’T ”unexpected.” It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.
The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well. And liberals simply dishonestly refuse to acknowledge documented history.
Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.
Let’s take a trip back in time, starting with the 1920s. From Burton Folsom’s book, New Deal or Raw Deal?:
In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history. Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment. High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).
Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.” And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”
And what happened?
“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent. These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies. Investors took more risks when they were allowed to keep more of their gains. President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.
Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue. In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million. In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark. Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).
Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935). See Table 1 on page 125 of New Deal or Raw Deal for that information.
FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.
It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.
Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever. Few realize that he was also a supply-side tax cutter.
“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”
– John F. Kennedy, Nov. 20, 1962, president’s news conference
“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”
– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”
“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”
“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”
– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.
“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”
– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill
Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.
So let’s move on to Ronald Reagan. Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.
Did Reagan’s tax cuts decrease federal revenues? Hardly:
We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts. And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASEof revenue.
So Reagan’s tax cuts increased revenue. But who paid the increased tax revenue? The poor? Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall. But that was exactly wrong. In reality:
“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”
So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades. Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering,“It would be misleading for me to tell any of you that there is a solution to it.”
Reagan whipped inflation. Just as he whipped that malaise and that crisis of confidence.
________
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733
________
The Laffer Curve, Part III: Dynamic Scoring
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What caught my attention was this chart showing the United States (light-blue bars) already is out of whack with major competitors and trading partners (green bars) – and Joe Biden wants to make a bad situation much worse (red bars).
And when I write “out of whack,” that’s not an idle statement.
it turns out that the United States would have the highest income tax rates in the world.
Higher than Greece. Higher than France. Higher than Italy. Here are some of the grim details.
…the tax increases in the Build Back Better Act (BBBA)…would raise revenues by $4 trillion on a gross basis over the next decade. The Biden tax increases in the budget and BBBA would come at the cost of economic growth, harming investment incentives and productive capacity…The budget proposes several new tax increases on high-income individuals and businesses, which combined with the BBBA would give the U.S. the highest top tax rates on individual and corporate income in the developed world… Taxing capital gains at ordinary income tax rates would bring the combined top marginal rate in the U.S. to 48.9 percent, up from 29.2 percent under current law and well-above the OECD average of 18.9 percent. …Raising the corporate income tax rate to 28 percent would once again bring the U.S. near the top of the OECD at a combined rate of 32.3 percent, versus 25.8 percent under current law and an OECD average (excluding the U.S.) of 22.8 percent.
The good news, relatively speaking, is that the United States would not have the highest aggregate tax burden (taxes as a share of economic output).
And the U.S. would not have the highest tax burden on consumption (no value-added tax in America, fortunately).
But with all of Biden’s new spending (along with the built-in expansions of government that already have been legislated), it may just be a matter of time before the U.S. copies those features of Europe’s stagnant welfare states.
The net result is lower living standards for the American people. The only open question is how far we drop.
That’s not a smart strategy when inflation already is at 40-year highs.
President Biden did address the topic of rising prices during his speech, but his approach was so incoherent that even Larry Summers (Treasury Secretary for Bill Clinton and head of the National Economic Council for Barack Obama) felt compelled to share some critical tweets.
This is remarkable. I’ve spent the past three decades fighting against some of Summers’ bad ideas on fiscal policy (he was a big supporter of the OECD’s anti-tax competition project, for instance).
But now we’re sort of on the same side (at least on a few issues) because Biden has embraced a reckless Bernie Sanders-type agenda of budget profligacy, class-warfare taxes, regulatory excess, and crass protectionism that is too extreme for sane people on the left.
Along with a head-in-the-sand view of monetary policy.
In a column for Canada’s Fraser Institute, Robert O’Quinn and I addressed Biden’s strange comments on inflation.
Here’s some of what we wrote on that topic.
After a disastrous first year pursuing an agenda that became increasingly unpopular, President Biden had an opportunity to reset his administration in a centrist direction as part of his first State of the Union Address. But he didn’t.On every domestic issue, he catered to the Democratic Party’s hardcore left-wing activists… Inflation, as Nobel laureate Milton Friedman observed, is always and everywhere a monetary phenomenon. …In his speech, Biden ignored the true cause of inflation. Instead, he offered a grab bag of statist ideas such as aggressive antitrust enforcement, price controls on prescription drugs, and tax credits for energy conservation and green energy—policies that, whatever their merits, have little or nothing to do with inflation.
Our basic message is that Biden ignored the real cause of inflation (bad monetary policy by the Federal Reserve) and instead came up with ideas (either bad or irrelevant) to addresses the symptom(s) of inflation.
We also noted that Biden’s nominees to the Federal Reserve are underwhelming.
Moreover, he has been pushing three controversial nominees to the Federal Reserve Board—Sarah Bloom Raskin, Lisa Cook and Philip Jefferson—who lack monetary expertise and are generally regarded as inflation doves. Raskin’s primary “qualification” is her support for using the Fed’s regulatory powers to divert credit away from oil and natural gas production. Cook and Jefferson have primarily written about poverty and race, which are outside of the Fed’s legislative mandate.
Instead, we have a president who thinks it’s a place where left-leaning activists should get patronage appointments.
P.S. If you have the time and interest, here’s an 40-minute videoexplaining the Federal Reserve’s track record of bad monetary policy.
P.P.S. If you’re constrained for time, I recommend this five-minute video on alternatives to the Federal Reserve and this six-minute video on how people can protect themselves from bad monetary policy.
This meant that voters either were old enough to personally experience the benefits of Reaganomics, or they managed to learn some history (in spite of a biased education establishment).
Well, now I have another reason to be happy. According to a new poll shared by Paul Bedard of the Washington Examiner, nearly 70 percent of respondents have a favorable impression of Reagan, easily the best result for all recent presidents.
Reagan also is disliked by the smallest percentage of respondents, a fact that almost surely irks some of my Reagan-hating friends.
My two cents for today is that the current fight between Trumpism and establishment Republicanism is merely stylistic. If you crunch the numbers, you’ll see that both camps are big spenders.
Let’s wrap up with this cartoon strip that captures my sentiments.
P.S. Here’s an amusing story from Reagan about socialism (h/t: Don Boudreaux).
Not quite as good as this video, and it’s not even good enough to get added to this collection of Reagan videos, but it is a good description of why socialism is a failure.
Ross Kaminsky of KHOW and I discussed how this is already happening.
I hate being right, but it’s always safe to predict that politicians and bureaucrats will embrace policies that give more power to government.
Especially when they are very anxious to stifle tax competition.
For decades, people in government have been upset that the tax cuts implemented by Ronald Reagan and Margaret Thatchertriggered a four-decade trend of lower tax rates and pro-growth tax reform.
That’s the reason Biden and his Treasury Secretary proposed a 15 percent minimum tax rate for businesses.
And it’s the reason they now want the rate to be even higher.
Though even I’m surprised that they’re already pushing for that outcome when the original pact hasn’t even been approved or implemented.
Treasury Secretary Janet Yellen will press G20 counterparts this week for a global minimum corporate tax rate above the 15% floor agreed by 130 countries last week…the global minimum tax rate…is tied to the outcome of legislation to raise the U.S. minimum tax rate, a Treasury official said.The Biden administration has proposed doubling the U.S. minimum tax on corporations overseas intangible income to 21% along with a new companion “enforcement” tax that would deny deductions to companies for tax payments to countries that fail to adopt the new global minimum rate. The officials said several countries were pushing for a rate above 15%, along with the United States.
Other kleptocratic governments naturally want the same thing.
A G7 proposal for a global minimum tax rate of 15% is too low and a rate of at least 21% is needed, Argentina’s finance minister said on Monday, leading a push by some developing countries… “The 15% rate is way too low,” Argentine Finance Minister Martin Guzman told an online panel hosted by the Independent Commission for the Reform of International Corporate Taxation. …”The minimum rate being proposed would not do much to countries in Africa…,” Mathew Gbonjubola, Nigeria’s tax policy director, told the same conference.
Needless to say, I’m not surprised that Argentina is on the wrong side.
And supporters of class warfare also are agitating for a higher minimum rate. Here are some excerpts from a column in the New York Times by Gabriel Zucman and Gus Wezerek.
In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. …it was a golden period. …President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough. …the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. …With a 25 percent minimum corporate tax, the Biden administration would begin to reverse decades of growing inequality. And it would encourage other countries to do the same, replacing a race to the bottom with a sprint to the top.
I can’t resist making two observations about this ideological screed.
Even the IMF and OECD agree that the so-called race to the bottom has not led to a decline in corporate tax revenues, even when measured as a share of economic output.
Since companies legally avoid rather than illegally evade taxes, the headline of the column is utterly dishonest – but it’s what we’ve learned to expect from the New York Times.
The only good thing about the Zucman-Wezerek column is that it includes this chart showing how corporate tax rates have dramatically declined since 1980.
P.S. For those interested, the horizontal line at the bottom is for Bermuda, though other jurisdictions (such as Monaco and the Cayman Islands) also deserve credit for having no corporate income taxes.
P.P.S. If you want to know why high corporate tax rates are misguided, click here. And if you want to know why Biden’s plan to raise the U.S. corporate tax rate is misguided, click here. Or here. Or here.
P.P.P.S. And if you want more information about why Biden’s global tax cartel is bad, click here, here, and here.
I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980’s and it all came about as he said it would when Ronald Reagan’s tax cuts took place. I wish we would lower taxes now instead of looking for more revenue through raised taxes. We have to grow the economy:
Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit. He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.
Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”
The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt. Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate. And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues. Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).
That’s something called a documented fact. But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich. Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates. Liberals ignore reality, but it is simply true. It is a fact. It happened.
Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again. Which is exactly what Obama wants to do.
People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTERwho believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues. He too cut taxes, and he too increased tax revenues.
So we get to Ronald Reagan, who famously cut taxes. And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion). And again, the taxes were paid primarily by the rich:
“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”
So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other. And I can simply quote the New York Times AT the time:
WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.
A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.
Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.
Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.
The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”
The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.
And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: ”unexpected.” But it WASN’T ”unexpected.” It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.
The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well. And liberals simply dishonestly refuse to acknowledge documented history.
Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.
Let’s take a trip back in time, starting with the 1920s. From Burton Folsom’s book, New Deal or Raw Deal?:
In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history. Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment. High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).
Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.” And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”
And what happened?
“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent. These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies. Investors took more risks when they were allowed to keep more of their gains. President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.
Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue. In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million. In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark. Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).
Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935). See Table 1 on page 125 of New Deal or Raw Deal for that information.
FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.
It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.
Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever. Few realize that he was also a supply-side tax cutter.
“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”
– John F. Kennedy, Nov. 20, 1962, president’s news conference
“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”
– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”
“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”
“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”
– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.
“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”
– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill
Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.
So let’s move on to Ronald Reagan. Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.
Did Reagan’s tax cuts decrease federal revenues? Hardly:
We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts. And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASEof revenue.
So Reagan’s tax cuts increased revenue. But who paid the increased tax revenue? The poor? Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall. But that was exactly wrong. In reality:
“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”
So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades. Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering,“It would be misleading for me to tell any of you that there is a solution to it.”
Reagan whipped inflation. Just as he whipped that malaise and that crisis of confidence.
Then-President-elect Bill Clinton, right, laughs as former President Ronald Reagan presents him with a jar of red, white, and blue jelly beans that Reagan said kept him from going to cigarettes in Los Angeles Nov. 27, 1992. (Photo: Paul J. Richards/AFP/Getty Images)
Longtime Democrat William Galston, deputy assistant to Bill Clinton for domestic policy, wrote a recent column for The Wall Street Journal on the performance of the economy during Bill Clinton’s eight years in office. According to Galston, virtually everything Clinton did was a hit.
Annual real growth in gross domestic product? It averaged a “robust 3.8%.” Inflation? A “restrained … 2.6%.” Payrolls increased nearly 236,000 a month, “the fastest on record for a two-term presidency.” Unemployment “fell from 7.3% in January 1993 to 3.8% in April 2000 before rising slightly to 4.2%” at the end of his second term. Adjusted for inflation, “real median household income rose by 13.9%.”
“What about the poor?” Galston asks, and then exults: “The poverty rate declined during the Clinton administration by nearly one-quarter, from 15.1% to 11.3%, near its historic low. And it declined even faster among minorities.”
It is hard to argue with Galston’s statistics. When Hillary Clinton ran for the presidency in 2016, she vowed to put her husband in charge of the economy because Democrats and most Americans knew it was flourishing when he was in the White House. This columnist acknowledged the point in The Washington Times. But voters, I cautioned, “need to be constantly reminded” that the prosperity materialized because Bill Clinton capitulated to Republicans who had politically pressured him into accepting policies that drove Ronald Reagan’s successful presidency.
Clinton’s first two years in office, Galston fails to tell his readers, ended in an electoral disaster for the Democrats. Determined to go on a high-tax, big-spend binge after winning the Oval Office in 1992, Clinton narrowly won a major income tax increase in the Democratic-controlled Congress. But congressional Republicans blocked his other important initiatives, including a big-spending “stimulus” program, a major energy tax, and Hillary Clinton’s national health care plan.
When 1994 rolled around and with Newt Gingrich leading the Republican off-year election charge from the House with his Reaganized “Contract With America” proposal, the GOP swept both houses of Congress for the first time in 40 years.
The consequence: Bill Clinton executed a policy somersault worthy of the Flying Wallendas. He quickly abandoned many of his first-term proposals, including his wife’s health care plan, informing us that “the era of big government is over.” He now favored balanced budgets and apologized for having “raised [taxes] too much.” With the Republicans calling the shots, he enacted significant tax breaks for business and the middle class, including a 30% cut in the capital gains tax for individuals.
He also signed into law welfare reform legislation, which included popular work requirements that Reagan had placed in his own welfare reform law when he was governor of California. Clinton even used Reagan’s rhetoric to sell the bill he signed.
The measure proved stunningly successful, reducing caseloads by 50% and cutting child poverty in half. Robert Rector, The Heritage Foundation’s welfare expert, wrote much of the 1996 bill that Clinton eventually approved. Overall, the nation, as Galston notes, was clearly enjoying itself.
But let me put up numbers included in the 2016 column, just as glowing as Galston’s, but somewhat different in emphasis.
The unemployment rate had dropped to 4% by the end of Clinton’s presidency, the lowest level in more than 30 years. Joblessness for blacks and Hispanics had been sliced in half, down to 7% and 5%, respectively. The stock market more than doubled between 1998 and 2000. And a miracle occurred. We began paying off the national debt in colossal chunks—in no small part due to the nearly $1 trillion that was cut from the military because Reagan had won the Cold War.
Democrats don’t want to admit it, but the truth is Reagan’s conservative policies dominated the two decades that began with his victory over President Jimmy Carter in 1980.
Reagan’s first two terms produced substantially lower tax rates for individuals and corporations, domestic (nondefense) spending restraint and deregulation, which resulted in the end of those gas lines that had so plagued Carter’s presidency.
Reagan’s first executive order eliminated the price controls Carter clamped on oil and natural gas, which proved a disaster since, as Gingrich noted, “It limited us to buying gasoline every other day depending on the last number of our license plates. From scarcity of gasoline to abundance in six months—this was one of Reagan’s first evident accomplishments.” And the accomplishments kept coming.
Reagan’s first two terms produced lower tax rates for individuals and corporations, domestic (non-military) spending restraint and deregulation, a jobs growth explosion, and a major boom period that went 92 months without a recession (November 1982 to July 1990). At the time, this proved to be the longest peacetime period of sustained economic growth in U.S. history.
The late, great economics writer Warren Brookes noted that under the Gipper, the percentage of low-income families was declining. These folks were moving upward on the wage scale and securing major tax relief through higher deductibles and a tripling of the earned income tax credit. Six million of the poorest working Americans, Brookes pointed out, were dropped from the income tax rolls entirely, prompting the praise of even anti-Republican liberals. Black families made the most impressive gains.
And Reagan achieved something even more remarkable, which also had a profound economic and monetary impact. He brought down the Soviet Empire without dragging this country into war.
He gained this astonishing victory through rejuvenating our economy, rebuilding our military, and engaging in cunning diplomacy. He squeezed Russia economically, placed deadly missiles into Europe that threatened Moscow itself, and armed the Afghans with Stinger missiles—forcing the Russians out of the country they had so brutally invaded.
When Reagan refused to surrender his Strategic Defense Initiative in 1986 at Reykjavik, Iceland, Mikhail Gorbachev, eager to end hostilities with the U.S., decided to end the Cold War, realizing his country, even if it wanted to, could no longer compete with America either militarily or economically. (Gorbachev knew Reagan’s reliance on supply-side economics and his major military strategy, both so harshly mocked by the Democrats, were working all too well in putting his country on the defensive.)
Democrats love to take credit for the good things that happened in the last two decades of the 20th century. But since his election in 1980, Reagan furnished this country with the conservative policies that dramatically reversed Clinton’s disastrous first two years of liberal governance. He also made Clinton’s presidency far more comfortable with his canny strategy that compelled Gorbachev to surrender the Evil Empire.
Reagan, in short, was key to Clinton’s success, an indisputable fact the Clintonites can’t yet bring themselves to acknowledge.
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This meant that voters either were old enough to personally experience the benefits of Reaganomics, or they managed to learn some history (in spite of a biased education establishment).
Well, now I have another reason to be happy. According to a new poll shared by Paul Bedard of the Washington Examiner, nearly 70 percent of respondents have a favorable impression of Reagan, easily the best result for all recent presidents.
Reagan also is disliked by the smallest percentage of respondents, a fact that almost surely irks some of my Reagan-hating friends.
My two cents for today is that the current fight between Trumpism and establishment Republicanism is merely stylistic. If you crunch the numbers, you’ll see that both camps are big spenders.
Let’s wrap up with this cartoon strip that captures my sentiments.
P.S. Here’s an amusing story from Reagan about socialism (h/t: Don Boudreaux).
Not quite as good as this video, and it’s not even good enough to get added to this collection of Reagan videos, but it is a good description of why socialism is a failure.
Ross Kaminsky of KHOW and I discussed how this is already happening.
I hate being right, but it’s always safe to predict that politicians and bureaucrats will embrace policies that give more power to government.
Especially when they are very anxious to stifle tax competition.
For decades, people in government have been upset that the tax cuts implemented by Ronald Reagan and Margaret Thatchertriggered a four-decade trend of lower tax rates and pro-growth tax reform.
That’s the reason Biden and his Treasury Secretary proposed a 15 percent minimum tax rate for businesses.
And it’s the reason they now want the rate to be even higher.
Though even I’m surprised that they’re already pushing for that outcome when the original pact hasn’t even been approved or implemented.
Treasury Secretary Janet Yellen will press G20 counterparts this week for a global minimum corporate tax rate above the 15% floor agreed by 130 countries last week…the global minimum tax rate…is tied to the outcome of legislation to raise the U.S. minimum tax rate, a Treasury official said.The Biden administration has proposed doubling the U.S. minimum tax on corporations overseas intangible income to 21% along with a new companion “enforcement” tax that would deny deductions to companies for tax payments to countries that fail to adopt the new global minimum rate. The officials said several countries were pushing for a rate above 15%, along with the United States.
Other kleptocratic governments naturally want the same thing.
A G7 proposal for a global minimum tax rate of 15% is too low and a rate of at least 21% is needed, Argentina’s finance minister said on Monday, leading a push by some developing countries… “The 15% rate is way too low,” Argentine Finance Minister Martin Guzman told an online panel hosted by the Independent Commission for the Reform of International Corporate Taxation. …”The minimum rate being proposed would not do much to countries in Africa…,” Mathew Gbonjubola, Nigeria’s tax policy director, told the same conference.
Needless to say, I’m not surprised that Argentina is on the wrong side.
And supporters of class warfare also are agitating for a higher minimum rate. Here are some excerpts from a column in the New York Times by Gabriel Zucman and Gus Wezerek.
In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. …it was a golden period. …President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough. …the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. …With a 25 percent minimum corporate tax, the Biden administration would begin to reverse decades of growing inequality. And it would encourage other countries to do the same, replacing a race to the bottom with a sprint to the top.
I can’t resist making two observations about this ideological screed.
Even the IMF and OECD agree that the so-called race to the bottom has not led to a decline in corporate tax revenues, even when measured as a share of economic output.
Since companies legally avoid rather than illegally evade taxes, the headline of the column is utterly dishonest – but it’s what we’ve learned to expect from the New York Times.
The only good thing about the Zucman-Wezerek column is that it includes this chart showing how corporate tax rates have dramatically declined since 1980.
P.S. For those interested, the horizontal line at the bottom is for Bermuda, though other jurisdictions (such as Monaco and the Cayman Islands) also deserve credit for having no corporate income taxes.
P.P.S. If you want to know why high corporate tax rates are misguided, click here. And if you want to know why Biden’s plan to raise the U.S. corporate tax rate is misguided, click here. Or here. Or here.
P.P.P.S. And if you want more information about why Biden’s global tax cartel is bad, click here, here, and here.
I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980’s and it all came about as he said it would when Ronald Reagan’s tax cuts took place. I wish we would lower taxes now instead of looking for more revenue through raised taxes. We have to grow the economy:
Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit. He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.
Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”
The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt. Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate. And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues. Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).
That’s something called a documented fact. But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich. Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates. Liberals ignore reality, but it is simply true. It is a fact. It happened.
Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again. Which is exactly what Obama wants to do.
People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTERwho believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues. He too cut taxes, and he too increased tax revenues.
So we get to Ronald Reagan, who famously cut taxes. And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion). And again, the taxes were paid primarily by the rich:
“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”
So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other. And I can simply quote the New York Times AT the time:
WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.
A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.
Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.
Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.
The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”
The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.
And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: ”unexpected.” But it WASN’T ”unexpected.” It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.
The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well. And liberals simply dishonestly refuse to acknowledge documented history.
Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.
Let’s take a trip back in time, starting with the 1920s. From Burton Folsom’s book, New Deal or Raw Deal?:
In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history. Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment. High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).
Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.” And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”
And what happened?
“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent. These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies. Investors took more risks when they were allowed to keep more of their gains. President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.
Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue. In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million. In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark. Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).
Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935). See Table 1 on page 125 of New Deal or Raw Deal for that information.
FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.
It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.
Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever. Few realize that he was also a supply-side tax cutter.
“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”
– John F. Kennedy, Nov. 20, 1962, president’s news conference
“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”
– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964
“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”
“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”
– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”
“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”
– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.
“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”
– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill
Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.
So let’s move on to Ronald Reagan. Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.
Did Reagan’s tax cuts decrease federal revenues? Hardly:
We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts. And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASEof revenue.
So Reagan’s tax cuts increased revenue. But who paid the increased tax revenue? The poor? Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall. But that was exactly wrong. In reality:
“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”
So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades. Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering,“It would be misleading for me to tell any of you that there is a solution to it.”
Reagan whipped inflation. Just as he whipped that malaise and that crisis of confidence.
I’ve already shared the “feel-good story” for 2022, so today I’m going to share this year’s feel-good map.
Courtesy of the Tax Foundation, here are the states that have lowered personal income tax rates and/or corporate income tax rates in 2021 and 2022. I’ve previously written about these reforms (both this year and last year), but more and more states and lowering tax burdens, giving us a new reason to write about this topic.
The map is actually even better than it looks because there are several states that don’t have any income taxes, so it’s impossible for them to lower rates. I’ve labelled them with a red zero.
And when you add together the states with no income tax with the states that are reducing income tax rates, more than half of them are either at the right destination (zero) or moving in that direction.
That’s very good news.
And here’s more good news from the Tax Foundation. The flat tax club is expanding.
I prefer the states with no income taxes, but low-rate flat taxes are the next best approach.
Texas has better government policy than California, most notably in areas such as taxation and regulation.
Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.
Now let’s look at a bunch of evidence to support those three sentences.
We’ll start with an article by Joel Kotkin of Chapman University.
If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.
Next we have some business news from the San Francisco Chronicle.
Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.
Not according to this column by Hank Adler in the Wall Street Journal.
California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.
The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.
But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).
Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).
Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.
Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.
…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.
California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.
Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).
Sadly, these high taxes don’t translate into good services from government.
The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.
Makes you wonder whether the rest of the nation should copy that model?
Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.
Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.
But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.
Here’s some of what he wrote in his column earlier this month for the New York Times.
I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?
Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).
But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”
That’s actually a big reason for the state’s decline, not a “bright spot.”
I’m not the only one to recognize the limitations of his column.
Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.
I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.
Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.
Let’s conclude with some levity.
Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.
Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.
So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.
With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.
Here are some excerpts from a report by CNN Money on rapid population growth in Texas.
More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.
But why is the population growing?
Well, CNN Money points out that low housing prices and jobs are big reasons.
And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.
But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.
Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.
That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.
But that wasn’t the only omission.
The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.
The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.
The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.
The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).
By the way, I’m not trying to argue that Texas is the best state.
Indeed, it only got the top ranking in one of the measures cited above.
My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.
At least compared to other states. And especially compared to the high-tax states that are stagnating.
Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.
Such as Illinois, as illustrated by this data and this Eric Allie cartoon.
P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.
P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.
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Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]
The Daily Hatch 