November 6, 2009

California v. Texas Again

From City Journal:
The Big-Spending, High-Taxing, Lousy-Services Paradigm
California taxpayers don’t get much bang for their bucks.

In 1956, the economist Charles Tiebout provided the framework that best explains why people vote with their feet. The “consumer-voter,” as Tiebout called him, challenges government officials to “ascertain his wants for public goods and tax him accordingly.” Each jurisdiction offers its own package of public goods, along with a particular tax burden needed to pay for those goods. As a result, “the consumer-voter moves to that community whose local government best satisfies his set of preferences.” In selecting a jurisdiction, the mobile consumer-voter is, in effect, choosing a club to join based on the benefits that it offers and the dues that it charges.

America’s federal system allows, at the state level, for 50 different clubs to join. At first glance, the states seem to differ between those that bundle numerous high-quality public benefits with high taxes and those that offer packages of low benefits and low taxes. These alternatives, of course, define the basic argument between liberals and conservatives over the ideal size and scope of government. Except for Oregon, John McCain carried every one of the 17 states with the lowest tax levels in the 2008 presidential election, while Barack Obama won every one of the 17 at the top of the list except for Wyoming and Alaska.

It’s not surprising, then, that an intense debate rages over which model is more satisfactory and sustainable. What is surprising is the growing evidence that the low-benefit, low-tax alternative succeeds not only on its own terms but also according to the criteria used by defenders of high benefits and high taxes. Whatever theoretical claims are made for imposing high taxes to provide generous government benefits, the practical reality is that these public goods are, increasingly, neither public nor good: their beneficiaries are mostly the service providers themselves, and their quality is poor. For evidence, look to the two largest states in the nation, which are fine representatives of the liberal and conservative alternatives ...

State and local government expenditures as a whole were 46.8 percent higher in California than in Texas in 2005–06—$10,070 per person compared with $6,858.

However, that needs to be adjusted for differences in price level, which is significantly higher in California than in Texas due to higher land costs. They are both huge states, but the whole point of living in California is to live in the narrow Mediterranean climate zone near the coast. In contrast, the eastern half of Texas is all livable, so land prices are low.

California's real problem is that its residents, on average, don't earn enough money to pay for living in an inherently expensive state.

Clearly, Texas's low tax - low spend model is the only one that makes sense for a state or a country with a huge Latino population. That assumption was behind the Rove-Bush Invite the World model, but it proved disastrous in high-cost California, which dragged down the rest of the country.

The concept that Latinos don't earn enough to pay for an expensive government is pretty obvious, but it's just off the radar screen. The liberal media just see more NAMs as more justification for more government spending and more votes for government spending.

My published articles are archived at iSteve.com -- Steve Sailer

34 comments:

David said...

>"the consumer-voter moves to that community whose local government best satisfies his set of preferences." In selecting a jurisdiction, the mobile consumer-voter is, in effect, choosing a club to join based on the benefits that it offers and the dues that it charges. America's federal system allows, at the state level, for 50 different clubs to join."

I wish. In reality, the states are under the Federal thumb in the most significant ways. (If we're talking about tax/program ratios only, without dragging in climate, etc.)

No state has freedom of association - verboten. No state refuses all federal highway funds. Every state is incentived and ruled in about the same way from DC.

It would be great to have 50 competing governments under a loose national structure, with people empowered to have whatever mix of laws and freedoms they like, voted on by internal migration (this being kept free by the national structure).

Think of it: 50 laboratories in political science, real freedom to shape and live under the kind of government one wants to live under! Could this be...real democracy? (Gasp.)

RandyB said...

True, but another part of the equation might be the one in While Europe Slept about Muslim immigration to that continent. The author, Bruce Bawser, points out that countries like Denmark have traditionally paid for generous social services, because they could correctly assume that their citizens wouldn't take handouts if not necessary. When Muslims came in, they had no such compunction, and were willing to make welfare a lifestyle.

The possibility that different demographic groups would have different ethics about welfare could well be the Achilles heal of all liberalism.

Anonymous said...

California is slowly becoming a very large Manhattan.

Anonymous said...

One of the things that helps is that Texas doesn't have a state income tax. So, taxes in Texas are not as progressive as in California. A low wage person pays property taxes through his rent, and sales tax.

Out of the $800 a month rent a low wage earner pays probably at least 20% is taxes to the state.

So even illegals end up paying.

It is more like Europe. It has higher taxes on low wage earners.

California just needs to find more ways to tax its low wage people.

If California can tax its high wage earners into leaving, it should consider taxing those who are left.

Anonymous said...

Land prices are only high in California because development is so limited by regulation. There's actually no place in the country where land is so scarce that it can push housing prices more than twice as high as they are in the cheapest places -- not even in Manhattan. You could easily fit the entire population of the country into the temperate zone of metro LA without building any denser than Paris. If you want to see the empirical work on this, type Edward Glaeser and housing prices into Google Scholar.

Anonymous said...

Let me modify that last comment. You'd need 2,000 square miles to house the population of the U.S. if you were going to build to the density of Paris, and, as I just eyeballed it, it appears that the the nice-weather area around LA is only about 1,000 square miles. I'm not including the Valley or the Pasadena area and certainly not the Inland Empire.

Steve Sailer said...

But what's the point of living in a nice weather area if you don't have a backyard to enjoy the weather in?

Anonymous said...

California just needs to find more ways to tax its low wage people.

I can't tell whether you're being facetious, but just in case you're serious, you need to be aware that any people with a mean IQ down around 80 [if not lower] will NEVER amount to anything other than a MASSIVE drain on an advanced society:


The Fiscal Cost of Low-Skill Households to the U.S. Taxpayer
April 4, 2007
by Robert Rector, Christine Kim and Shanea Watkins, Ph.D.
heritage.org
EXECUTIVE SUMMARY

EXECUTIVE SUMMARY: ...A household’s net fiscal deficit equals the cost of benefits and services received minus taxes paid. If the costs of direct and means-tested benefits, education, and population-based services alone are counted, the average low-skill household had a fiscal deficit of $22,449 (expenditures of $32,138 minus $9,689 in taxes)...

The Fiscal Cost of Low-Skill Immigrants to the U.S. Taxpayer
by Robert Rector and Christine Kim
May 21, 2007
heritage.org
EXECUTIVE SUMMARY

EXECUTIVE SUMMARY: ...A household's net fiscal deficit equals the cost of benefits and services received minus taxes paid. When the costs of direct and means-tested benefits, education, and population-based services are counted, the average low-skill household had a fiscal deficit of $19,588 (expenditures of $30,160 minus $10,573 in taxes)....

robert61 said...

Paris transplanted to LA sounds...fabulous. Sign me up. I can deal with taking the sun on a balcony.

Anonymous said...

Steve, taxes are severly progressive. The seven figure earners in California pay the taxes. There is no tax problem for latinos in Texas or California.

I think I read that in NYC about 4000 people paid half the income tax haul. In Calif they added surtax after tax on the rich and many moved out.In NJ my accountant said that most of his customers who were like me, owned our own business and were not tied to the local geography, moved to Florida. No underclass minimum wage earner moves to Florida to avoid the NJ taxes.

Nick Sarkozy said...

What is darkly amusing is the hope for a future 'recovery' in California. But the future in California, and much of the American southwest, is a gigantic mestizo baby boom: It's a bonafide demographic time bomb.

California last had a AAA credit rating in 1986, which was the year of the Reagan amnesty.

The economic/fiscal situation in California will continue to deteriorate and sink toward a Latin American [specifically Mexican] level as the new mestizo population booms.

The political 'solution' is a corrupt elite's dream come true: It will be similar to Italy where the functional light-skinned north continually transfers huge sums, through the Federal Goverment mechanism, to the dysfunctional darker-skinned south in order to maintain the framework of a nation. The transfer payments could theoretically go on for many, many decades before the nation finally fractures. But the standard of living for the nation overall will be lowered to 'second world' status the entire journey a la Brazil or India.

Race matters. And our so-called elites' refusal to acknowledge that reality means brutal economic and social consequences for America.

There is obviously the same sort of future planned for the E.U by the Euro elites, by the way.

jody said...

california recently enacted a "temporary" additional 10% witholding on everybody's paycheck. the state claims they will return the money in 6 months or so, but i would not count on that. residents should prepare for the 50/50 chance that the money will be "returned" in the form of an IOU.

there's no way middle class euro americans can afford to live in california much longer. by 2020 this will leave only the wealthy and the mexicans as the large tax bases in the state. from what steve said, a study found that mestizos in the US had a shocking average IQ of 83 or 84. that spells the end of california. even the wealthy cannot support state funded services for 20 million IQ 84 people.

Bob said...

I highly agree with Anon that California should find ways to tax illegals more and high-earning citizens (like me!) less.

My favorite method is very strict enforcement of vehicle regulations. Immediate impound of the vehicles of unlicensed drivers or unregistered/uninsured vehicles! This is also good for the environment, good for traffic, and reduces insurance rates.

Higher property taxes are a good idea too if the money is used to lower income taxes. Property taxes are impossible for illegals to avoid and get passed on in higher rents, but they easily avoid income taxes.

Another good idea is to start applying the sales tax to food and to raise the rate overall.

Bob said...

Jody, California, unfortunately, is in no danger of actual bankruptcy.

I wish it would! Maybe a right-wing group could get a 50% income tax cut on the ballot. I'd vote for it!

If California actually did go bankrupt the too groups most hurt would be fat-ass retired state workers with their excessive pensions (retire at 55 with full salary!) and state bondholders, which are usually super-rich . Cindy McCain's tax return showed that the majority of her income was from state bonds.

Screw em! Cut taxes until the state goes bankrupt!

Henry Canaday said...

Something like the California-Texas split played out 50 years ago in New York City versus the rest of the country. New Yorkers paid high taxes, but got to live in a scarce-space, high-cost city with extraordinary employment opportunities, plenty of amenities and decently functional government.

This balance of high costs and extraordinary benefits held together until the mid-60s, when safety declined, welfare became excessive and destructive, payoffs to unionized city workers exploded, and taxes went up further to take care of the resulting mess. The middle class and business started to move out, which created the need for higher tax rates and further desertion by high tax-payers.

The whole destructive cycle went on until the 1990s, when crime and welfare were brought under control, while the city still had enough attractive assets to retain high-earning people.

But New York is just a city of 7 million, not a state of 30+ million. That makes it much easier to reverse or at least check a disaster. And, as David notes, states are simply not very free these days to avoid the uniformly destructive policies mandated by Federal laws or Federal courts.

All New York City really had to do to revive itself was 1) cut crime, which the media, culture and courts had finally learned to support, 2) discipline welfare, which Congress backed in 1995.

California has a lot more folly, much of it originated in Washington but now embedded in the State's DNA, so to speak, that must be repaired.

Jimmy Crackedcorn said...

Higher property taxes are a good idea too if the money is used to lower income taxes. Property taxes are impossible for illegals to avoid and get passed on in higher rents, but they easily avoid income taxes.

Oh, but they do avoid property taxes, in two ways - first, by living in housing far cheaper than most whites; and second, by living two or three families to a house. Yes, they're still paying property taxes; but they're paying far less, per capita, than most whites.

If you want to hit illegal immigrants the hardest, higher sales taxes are probably the best way to go. More and more Americans are buying goods tax free over the internet, but that often isn't an option for illegals, who seldom have credit cards.

Of course that's not the kind of reason you want to give to your state legislator or city councilman for preferring sales taxes over property and income taxes.

Pat Shuff said...

As with most methodologies I guess it's who is counting what and how. The state and local tax burdens according to The Tax Foundation, unlike the article and election results, has WY and Alaska ranked dead last, 48th and 50th respectively, and OR dead middle.

State-Local Tax Burdens Dip As Income
Growth Outpaces Tax Growth

New Jersey’s Citizens Pay the Most, Alaska’s Least

http://tinyurl.com/65muat

"The framework that best explains why people vote with their feet" must first be framed on common terms.

Anonymous said...

I highly agree with Anon that California should find ways to tax illegals more and high-earning citizens (like me!) less.

Again, are you guys being facetious?

[Rush Limbaugh was being facetious on that famous day when he advocated taxing the poor.]

People with IQs down around 80 [if not lower] will NEVER be net contributors to an advanced society [or contributors to anything at all that we would recognize as a "society", advanced or not].

As Robert Rector has calculated [above], these people represent a net drain of $19,588 per family per year when they first arrive, and $22,449 per family per year after they've become established for a generation or so [i.e. their drain on society WORSENS as they move out of the underground economy and into the "mainstream" economy of welfare handouts and AA sinecures].

Given current demographics [i.e. absent some sort of a forced resettlement of millions upon millions of Central American aboriginals back to their countries of origin, to include a repudiation of Wong and a return to Elk], California will NEVER AGAIN be able to balance its budget.

In the 2008-2009 school year, Hispanic boys constituted half or more of all students in the public schools in grades K through 4, and Hispanic girls constituted half or more of all students in the public schools in grades K through 6 - i.e. circa the 2004-2005 school year, Hispanics became an ABSOLUTE MAJORITY of all students in the California public schools first grade class.

By IQ, that gives you something like the following:


MEAN IQ 100-ish
Female Asian 18,711
Female White (not Hispanic) 56,874
Male Asian 19,547
Male White 61,343

MEAN IQ 80-ish
Female American Indian or Alaska Native 1,536
Female Hispanic or Latino 117,686
Female African American 14,920
Male American Indian or Alaska Native 1,626
Male Hispanic 124,408
Male African American 15,823

MEAN IQ UNKNOWN
Female Pacific Islander 1,386
Female Filipino 5,386
Female Multiple or No Response 10,746
Male Pacific Islander 1,442
Male Filipino 5,922
Male Multiple or No Response 11,492


[Lynn & Vanhanen estimated a mean IQ for the Phillipines of 86 in both 2002 & 2006, but I am going to go out on a limb and guess that "Chinese" Filipinos have a much higher IQ than "Muslim" Filipinos, and that more of the former made it to the USA, so I'll leave "Filipino" as "IQ Unkown".]

Anyway, in 2008-2009, California's first grade public school IQ distribution breaks down as roughly:


MEAN IQ 100-ish
156,475 of 468,578
33.39%

MEAN IQ 80-ish
275,999 of 468,578
58.90%

MEAN IQ UNKNOWN
36,104 of 468,578
7.71%


And anyone on a palecon/HBD board ought to recognize that as a pretty good recipe for disaster.

PS: I can't seem to find [in only limited googling] any breakdown of private school enrollment [or home schooling] by race or grade, but I did find this document which indicates that private school enrollment in California has collapsed, from 63,277 in first grade for the 1996-97 school year, all the way down to 49,182 in first grade for the 2006-2007 school year.

Which, in turn, suggests to me that young, fertile white adults of child-rearing age are fleeing California in droves [or else they've completely given up on making babies, or maybe they just never re-located to California after college in the first place].

Anonymous said...

But even if you assume that there were about 49,000 white & asian kids in first grade in California private schools in 2008-2009 [with no blacks or hispanics at all], then that only gets you to


MEAN IQ 100-ish
205,475 of 517,578
39.70%

MEAN IQ 80-ish
275,999 of 517,578
53.33%

MEAN IQ UNKNOWN
36,104 of 517,578
6.98%


And that's still a recipe for disaster.

albertosaurus said...

There's another reason why people abandon California for Texas - gun laws.

When one of the many Internet start-ups that I had worked for went bankrupt in 2000, my buddy moved back to Texas because of the concealed carry law. He didn't like California's attitude towards his handgun.

Anonymous said...

"California just needs to find more ways to tax its low wage people."

"I can't tell whether you're being facetious, but just in case you're serious, you need to be aware that any people with a mean IQ down around 80 [if not lower] will NEVER amount to anything other than a MASSIVE drain on an advanced society"


Oh, I agree taxing the low wage earners is not a solution. However, it reduces their burden on the productive and makes them pay more of their own way. Also, because of high property taxes, it is harder for them to get a mortgage. So, even with a gov't subsidized loan with a low rate, the taxes put the house out of reach by increasing the monthly payment so much. Also, the over 8% sales tax means they pay tax on virtually all of their income because poor people spend almost all of their money even if they earned it tax free in cash economy. This includes food except what they have to cook themselves. Prepared food and all products and services are taxed.

Anonymous said...

However, it reduces their burden on the productive and makes them pay more of their own way.

Look at Rector's numbers above: Very roughly, the aboriginal Hispanics consume government goodies [about $30,000 per family per year] at three times the rate at which they pay back into the kitty [roughly $10,000 per family per year].

They will NEVER get anywhere close to breaking even in terms of taxes paid -vs- goodies consumed: Not from now until the end of time.


Also, because of high property taxes, it is harder for them to get a mortgage. So, even with a gov't subsidized loan with a low rate, the taxes put the house out of reach by increasing the monthly payment so much. Also, the over 8% sales tax means they pay tax on virtually all of their income because poor people spend almost all of their money even if they earned it tax free in cash economy. This includes food except what they have to cook themselves. Prepared food and all products and services are taxed.

If your position is that you want to use the tax code to chase away all the undesirables [the way that many wealthy towns use the zoning code to e.g. forbid trailers and pre-fab housing], then I suppose you could give it the old college try, but:

A) The bleeding hearts will never allow this to happen, and

B) The aboriginal Hispanics are at a point where they can vote to prevent it from happening, and

C) Even if it did happen, the aboriginal Hispanics would just disappear back into the underground economy, and you'd be left with a fascist police state enforcing all these taxes [which is practically what you've got in California already, and it's only served to chase away all the traditional Americans, i.e. the Republicans].

Again, I'm not entirely sure whether you are being facetious in your comments, but with current demographics, California is DOOMED.

There is no hope.

Anonymous said...

I agree that regressive taxes are not a solution. However, they do account in part for some of the observed differences in California and Texas. Texas state legislators know that the health care bill will bankrupt Texas.

Also, the term hispanic is so misleading. There have always been lots of hispanics in Texas. Many of them are established and those are more white than indian. The hard core underclass hispanics we are getting more and more of are not the same as the established hispanic population which is more assimilated and more white. Probably why hispanic students in Texas do better on standardized tests than lettuce picker hispanics in Nebraska.

I agree that you can't build a first world country with third world people. No tax strategy can make it work. However lower taxes on the productive are better anyway because then the productive have more money to buy services, which in turn helps those at the bottom by creating a market for their labor. High taxes on the productive just takes their money and gives losers money for nothing depriving them of dignity while freeing up their time for crime.

Anonymous said...

"And anyone on a palecon/HBD board ought to recognize that as a pretty good recipe for disaster."

I doubt a society needs more than a small percentage of high and moderately-high iq people to be prosperous - the political and economic system seems to be much more important (e.g., north vs. south korea). In the US we have an overabundance of high-iq people, trapped in endless low-wage post-doc positions in the case of physicists and biologists and acting as rent-seekers in the case of wall street i-bankers and lawyers.

Anonymous said...

"High taxes on the productive just takes their money and gives losers money for nothing depriving them of dignity while freeing up their time for crime."

By "productive" are you referring to Goldman Sachs' bankers, lawyers, mortgage brokers, academics? Lettuce pickers, maids, etc. seem much more "productive" to me...

Anonymous said...

There have always been lots of hispanics in Texas. Many of them are established and those are more white than indian. The hard core underclass hispanics we are getting more and more of are not the same as the established hispanic population which is more assimilated and more white.

Right - the idea that there is any similarity whatsoever between Castilian/Hapsburgian Hispanics and aboriginal Hispanics is simply ludicrous.

Anonymous said...

Guys, I hate to keep beating a dead horse, but people with IQs in the 80s can't even read.

They can't write.

They can't add numbers together [much less subtract them, or multiply them, or divide them, or come to any sort of reconciliation with the idea of abstract representations of them, in the form of "x" or "y"].

There is NOTHING that they can offer to an advanced society that would be capable of producing wealth.

What can they do?

They can push a mop*.

They can paint a wall [poorly - afterwards, the floor will be covered with drops of the paint, and the paint will get all over the outlet covers and in the outlets themselves and the demarcation with the woodwork trim will look awful, etc etc etc].

I certainly would not trust them to perform the structural framing on a wooden house [much less the welding on a steel structure of a commercial building].

They can maybe hang the drywall once the more intelligent folks have determined that the structural frame of the house is sound, although, even there, the drywall is going to look awful where it's supposed to line up with the electrical outlets.

Maybe they can work the butchery line at a meatpacking plant, but you're setting yourself up for all kinds of problems with E Coli if you don't watch them like a hawk.

I'd be very careful about allowing them onto my grounds with a lawnmower or a weedeater, especially if there were small children playing in the yard.

They can't teach school, they can't [reliably] perform the duties of a police officer or a fire fighter - heck, they can't even coach youth sports teams.

I mean, seriously - the idea that they can produce as much as they consume in an advanced welfare-state society like ours is insane.

Within the confines of the modern welfare state, these people will consume and consume and consume until the entire society collapses under the weight of them.



*I used to work part-time in a hospital, and even way back then, before I had really thought about what we now call "HBD", I realized that the hospital administrators were hiring low IQ people to clean and [ostensibly] sterilize the hospital and its equipment because they must have run a business school calculation which held that it was cheaper to treat the resulting infections with antibiotics than to pay the wages necessary to lure higher IQ folks into those jobs and have the cleaning and sterilization performed effectively.

Fast forward a decade or so, and you've got a nationwide [really worldwide] epidemic of MRSA, VRSA, VRE, etc etc etc.

Chapin Disciple said...

Steve--a serious question. At what point will California become so unpleasant that you feel like you have to leave its terrific climate and move elsewhere? This is something I think about all the time, as my state is almost as dysfunctional as California.

I mean, you could do what the Mexican elite do and live in a gated community while the world around you goes to hell, but I don't get the sense that you're the sort of person who would like that.

Anonymous said...

"By "productive" are you referring to Goldman Sachs' bankers, lawyers, mortgage brokers, academics? Lettuce pickers, maids, etc. seem much more "productive" to me..."

No, I don't consider those who find ways to skim the cream off the top "productive". I consider those who make goods and provide valuable services "productive" so, yes, that includes lettuce pickers and maids. However, a guy who runs a cleaning company and makes $300k is more highly taxed than someone who makes his $3 million at Goldman Sachs. Yet the former is more productive than the latter.

Anonymous said...

When are the Asians in California going to get tired of paying welfare for NAM's?

D. Watson said...

Your response to the article is that it's a question of housing costs. Taking property taxes out of the question, neither a gallon of milk nor most any other product costs 40% more in CA than in TX. The expense of living is in rent/property taxes/mortgages. That is far less a factor for the government.

The article talks about pensions and how many government employees and bureaucrats there are relative to their effectiveness in producing the benefits people care about. Those costs are largely independent of housing prices.

David said...

The collections industry (as collectors call it) may go down the drain eventually, or change into bounty hunting, since you can't get blood out of a turnip and there are more and more turnips out there.

Someday the realization will dawn that all that money - or a significantly larger portion of it than was previously projected - just ain't gonna be repaid. It went into a bunch of stomachs and that's the end.

Ross said...

The sucking sound of Jobs going to Mexico, instead was the sucking sound of Mexicans heading to El Norte. Nafta knew that Mexico could not compete with mechanized American agriculture. The displaced Mexican farmers were intended to land in the Macquiladoras. But, the Macqui's are largely failures. Next time you buy a Chinese product, ask yourself how come the Nafta scheme didn't come true, and all the promised low cost goods from Mexican labor never materialized? China short circuited Nafta. But, once a government program gets started it gains a life of its own, even when it demonstrably is a failure.

Ross said...

The Mexican's that are coming to Texas are no longer the high fraction white Mestizo's of the North. They are the Indian peasant class of the South, forced off their land by Nafta. The peasants historically scratched in the dirt and produced enough food for their subsistence. The Green revolution from the 60's increased grain yields and Mexico's population boomed from 60M to 130M today. Demographically Mexico is now mostly younger aged people. This is a recipe for disaster for Mexico's white Elite. The Macquiladoras were supposed to ramp up and make jobs for these youngsters. However, the rise of China has undone the Nafta scheme. China has high IQ people willing to work for cheap. China has public banking, and other state institutions that work better and are less corrupt than Mexico. The unpleasant reality, is that the Mexican problem is one of our own making. Our Elites are determined to have a North American Union, but political correctness has blinded them to the nature of "people" and hence easily predicted outcomes. Texas Hispanic's i.e. Tejano's don't like the invaders, especially as they are destroying the Tejano culture. Tejanos have to hold their nose as they can barely tolerate the low class, low IQ Mexican's flooding in.