
On California, Don't Believe the Hype - grellas
http://online.wsj.com/article/SB10001424052748704586504574654673186751100.html?mod=WSJ_hps_sections_personalfinance
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eli
What's with this silly idea that states "deserve" to get back whatever money
they pay in federal taxes? Federal taxes aren't levied against states, they're
levied against people. And even personally, there's no guarantee that you will
get back in benefits every dollar you've paid in taxes. Sorry, it just doesn't
always work that way.

It's like arguing that I shouldn't have to pay school tax because I'm not in
school (hint: then it's not a school tax, it's tuition). Or that the people
who have never had a house catch on fire got ripped off because their tax
dollars funded the fire department anyway.

~~~
karzeem
One big argument for why you should have to pay school tax even if you don't
have kids is the positive externalities of public education; you benefit from
other people's kids getting an education, so you should pay for that.

There's a similar externalities-based argument for why some states should be
net tax donors to the federal government, but I think it's a little weaker.
How much does California benefit from New Mexico or Virginia being a net tax
recipient?

~~~
baguasquirrel
<http://www.taxfoundation.org/research/show/22685.html>

In 2005, Californians paid out $35.9 billion and received back $31.2 billion.
That's a gap of $4.7 billion. That's a lot.

Do you think the amount of money the state receives indirectly from tech
companies run by Americans educated in out-of-state colleges exceeds this
amount? The figures for this are much harder to come by, but I suspect that
the state makes back at least a same-order-of-magnitude amount of what it pays
out.

According to wikipedia, there were 386,000 tech workers in the Bay Area in
'08. If we assume that half of them are Americans from out of state, then
they'd have to pay about $5000 in taxes a year to make it worth it, assuming
that there's also a multiplier of 4 due to workers in other industries being
hired to serve them.

Of course, all this assumes we're running on a "we pay you taxes in exchange
for your nerds" model, and it may be more complicated than that.

~~~
ricaurte
California actually paid out $289 billion and received $242 billion for a net
outflow of $47B.

[EDIT] Colorado was the state the paid out $35.9 billion and received $31.2
billion.

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grellas
California _does_ have tremendous wealth and vast continuing productive
capacity, given the talent, resources, and opportunities extant within the
state, and the author correctly characterizes any doomsday scenario as lacking
credibility.

The problem, though, as seen from the view of one who has lived here for 40+
years, is that the powers that be in Sacramento had too much of a good thing
during the boom years and, having raised public spending by large amounts when
the tax coffers were full and exploding, don't want to make any systemic
changes to spending levels now that receipts are way down in fear that this
will short-change their pet programs when good times return.

That is why spending is strained to the limit even though fundamentals are
still pretty good. The assumption all along, though, is that nothing can kill
the golden goose and, while I agree with the author of this piece that extreme
problems aren't imminent, that doesn't mean that the state can't ultimately
wear itself down through fiscal irresponsibility. Only time will tell in the
long term on this point.

~~~
joshu
I always wonder why state spending isn't limited to, say, the average of the
last 10 years receipts.

Of course, if there was surplus, it'd go into a fund, and politicians would
vote to spend the surplus.

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natmaster
The problem with California is not that it is taxing too much, but that' it's
spending too much. The fact that it's taxing isn't much above average
indicates the huge disparity between the two which caused the debt.

~~~
ytinas
Care to back that statement up? Does California get more services for its
money than lower tax states? Do workers get better protection?

Maybe the problem really is that the costs of these services have gone up but
the taxes haven't been adjusted to deal with that.

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coffeemug
That's because Kazakhstan is sitting on top of a known twenty billion barrel
oil field controlled by a government monopoly. At $70/barrel that gives them
1.4 trillion dollars of liquid assets (literally). Between that at 100
trillion known cubic feet of gas (at $5-$10/1000 cubic feet, do the math) I
wouldn't be too worried about them defaulting on their debts. California, on
the other hand...

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Alex3917
It's not just the size of the debt that's worrying, it's the reasons why we
have the debt.

~~~
aaronblohowiak
I propose an amendment to the state constitution mandating...

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MaysonL
This article scares me.

Why?

Because looking at a few samples of Mr. Arends's work, and comments on it, he
seems to be way out of touch.

see these examples: Who’s paying Brett Arends to malign Apple? July 21st, 2009
[http://www.roughlydrafted.com/2009/07/21/whos-paying-
brett-a...](http://www.roughlydrafted.com/2009/07/21/whos-paying-brett-arends-
to-malign-apple/)

Load Up the Pantry by Brett Arends Wednesday, April 23, 2008
[http://finance.yahoo.com/banking-
budgeting/article/104914/Lo...](http://finance.yahoo.com/banking-
budgeting/article/104914/Load-Up-the-Pantry)

Why Apple Shouldn't Pay a Dividend January 11, 2010 by Felix Salmon
[http://seekingalpha.com/article/181974-why-apple-shouldn-
t-p...](http://seekingalpha.com/article/181974-why-apple-shouldn-t-pay-a-
dividend?source=feed)

I could undoubtedly find a few more, possibly even some in favor of his
thinking - these are just from the first page of a Google search on brett
arends.

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nazgulnarsil
is anyone actually under the impression that ruling people (read: the ability
to tax them) isn't insanely profitable? just because the books aren't
balanced? california is one of the most productive places in the world per
capita wise.

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j_baker
Wow. The last sentence made the author sound like a liberal Rick Perry!

