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California as No. 1 (high state taxes causing brain drain and capital flight)

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California as No. 1 (high state taxes causing brain drain and capital flight)

Old 07-18-08, 08:35 AM
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California as No. 1 (high state taxes causing brain drain and capital flight)

I am against policies that cause brain drain and capital flight.


http://online.wsj.com/article/SB1216...w_and_outlooks

California as No. 1

July 17, 2008; Page A14

New York City has long been the highest tax jurisdiction in the United States, but California politicians are proposing to steal that brass tiara. California faces a $15 billion budget deficit and Democrats who rule the state Legislature have proposed closing the gap with a $9.7 billion tax hike on business and "the rich." There's a movie that describes this idea: Clueless.

The plan would raise the top marginal income tax rate to 12% from 10.3%; that would be the highest in the nation and twice the national average. This plan would also repeal indexing for inflation, which is a sneaky way for politicians to push middle-income Californians into higher tax brackets every year, especially when prices are rising as they are now. The corporate income tax rate would also rise to 9.3% from 8.4%. So in the face of one of the worst real-estate recessions in the state's history, the politicians want to raise taxes on businesses that are still making money.

This latest tax gambit was unveiled, ironically enough, within days of two very large California employers announcing they are saying, in the famous words of Governor Arnold Schwarzenegger, "hasta la vista, baby" to the state. First, the AAA auto club declared it will close its call centers in California, meaning that 900 jobs will move to other states. "It costs more to do business in California," said a AAA press release, in the understatement of the year.

Then last week Toyota announced it is canceling plans to build its new Prius hybrid at its plant in the San Francisco Bay area because of the high tax and regulatory costs. Adding to the humiliation is that Toyota will now take this investment and about 1,000 jobs to a more progressive and pro-business state: Mississippi.

There is already a reverse gold rush going on in California and the evidence points powerfully toward high tax rates as a culprit. Census Bureau data show that, from 1996-2005, 1.3 million more Americans left than came to California. And the people who are leaving are disproportionately those with higher incomes: the very targets the Democrats want to tax more.

The liberal fairy tale is that the rich "don't pay their fair share." The reality is that there's no state in the country more dependent on six- and seven-figure earners to pay its bills. Those with incomes of more than $100,000 pay 83% of the state's income taxes, and the richest 6,000 of the 38 million Californians pay $9 billion in taxes. Every time a rich person like Tiger Woods departs, the state fiscal problem deepens.

The Democratic tax plan will give rich people a further incentive to flee
at the very time the real-estate market is in collapse. New housing data reveals that the average California home price fell by 28% from June 2007 to June 2008, almost double the decline of any other state. The politicians in Nevada, the state with the third worst real-estate market, are hoping California raises taxes, because this could be a fast way to revive the Reno and Las Vegas housing markets.

What the politicians in California refuse to address is their own overspending. State outlays were up 44% over the past five years, meaning that California is spending at a faster pace than even Congress. Minority Republicans in the Legislature say the solution is a hard expenditure cap – like 46 other states have. Yet even in the face of the giant deficit, Mr. Schwarzenegger and the Democrats want to pass a new $9 billion water bond, a $14 billion state-run health insurance program, and the most expensive climate-change program in the country.

It may be that California Democrats are trying this now as a kind of trial run for Barack Obama next year. The Illinois Senator also believes he can solve the federal government's fiscal imbalance by imposing higher tax rates on small business employers and the wealthiest Americans. If they can get away with it in Sacramento, look for a national reprise next year.

.

http://www.sfgate.com/cgi-bin/articl...NGSVIO7NG1.DTL

May 9, 2006

For the 2004 tax year, 38,000 California tax returns reported more than $1 million in income. They represented just 0.2 percent of all state-tax returns, yet they accounted for 14 percent of total adjusted gross income and about 30 percent of the total personal tax.

The top 3 percent of the returns, those with incomes exceeding $200,000, paid about 60 percent of all state taxes.
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Old 07-18-08, 08:47 AM
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Don't you just love those 'limited' options of a grundle poll?
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Old 07-18-08, 08:52 AM
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I think lowering taxes would help, but there's an overall cost of living that is always going to be high due to the attractiveness of being on the coast.
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Old 07-18-08, 09:10 AM
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The Wall Street Journal editorial page seems really scared of Barack Obama.

You know what also causes "brain drain"? Not having public services, good public schools, nice parks, and other government funded niceties that are enjoyed by educated people.
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Old 07-18-08, 09:13 AM
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Originally Posted by classicman2
Don't you just love those 'limited' options of a grundle poll?
What other options would you have liked to see in my poll?
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Old 07-18-08, 09:13 AM
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Originally Posted by Groucho
I think lowering taxes would help, but there's an overall cost of living that is always going to be high due to the attractiveness of being on the coast.

That's true, but only for the part that's near the coast. There's still the other 80% (or whatever).
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Old 07-18-08, 09:22 AM
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Originally Posted by wendersfan
The Wall Street Journal editorial page seems really scared of Barack Obama.

You know what also causes "brain drain"? Not having public services, good public schools, nice parks, and other government funded niceties that are enjoyed by educated people.

Did you see this part that I bolded?

What the politicians in California refuse to address is their own overspending. State outlays were up 44% over the past five years, meaning that California is spending at a faster pace than even Congress.

Did you see this part that I bolded?

Those with incomes of more than $100,000 pay 83% of the state's income taxes

And did you see this part that I bolded from the second article?


For the 2004 tax year, 38,000 California tax returns reported more than $1 million in income. They represented just 0.2 percent of all state-tax returns, yet they accounted for 14 percent of total adjusted gross income and about 30 percent of the total personal tax.

The top 3 percent of the returns, those with incomes exceeding $200,000, paid about 60 percent of all state taxes.

If the goal is to have good public services, how does brain drain and capital flight achieve that goal?

Where did you ever get the idea that giving more money to bad public schools makes them better?

What do you think of this?

http://en.wikipedia.org/wiki/Educati..._united_states

Many people have claimed that U.S. public schools are underfunded, but this claim is debatable. According to a 2005 report from the OECD, the United States is tied for first place with Switzerland when it comes to annual spending per student on its public schools, with each of those two countries spending more than $11,000 (in U.S. currency). [15] Despite this high level of funding, U.S. public schools lag behind the schools of other rich countries in the areas of reading, math, and science. [16] Achievement and funding can vary widely between districts, so the relationship between funding and achievement is complex.[50] As noted above, while arguments can be made whether overall funding is adequate, the amount actually reaching the classroom level is not adequate to fully fund classroom activities.[51]

According to a 2007 article in The Washington Post, the Washington D.C. public school district spends $12,979 per student per year. This is the third highest level of funding per student out of the 100 biggest school districts in the U.S. Despite this high level of funding, the school district provides outcomes that are lower than the national average. In reading and math, the district's students score the lowest among 11 major school districts - even when poor children are compared only with other poor children. 33% of poor fourth graders in the U.S. lack basic skills in math, but in Washington D.C., it's 62%. [17]

According to a 2006 study by the Goldwater Institute, Arizona's public schools spend 50% more per student than Arizona's private schools. The study also says that while teachers constitute 72% of the employees at private schools, they make up less than half of the staff at public schools. According to the study, if Arizona's public schools wanted to be like private schools, they would have to hire approximately 25,000 more teachers, and eliminate 21,210 administration employees. The study also said that public school teachers are paid about 50% more than private school teachers. [18]

In 1985 in Kansas City, Missouri, a judge ordered the school district to raise taxes and spend more money on public education. Spending was increased so much, that the school district was spending more money per student than any of the country's other 280 largest school districts. Although this very high level of spending continued for more than a decade, there was no improvement in the school district's academic performance. [19] [20]

According to a 1999 article by William J. Bennett, former U.S. Secretary of Education, increased levels of spending on public education have not made the schools better. Among many other things, the article cites the following statisitcs: [21]

* Between 1960 and 1995, U.S. public school spending per student, adjusted for inflation, increased by 212%.

* In 1994, less than half of all U.S. public school employees were teachers.

* Out of 21 industrialized countries, U.S. 12th graders ranked 19th in math, 16th in science, and last in advanced physics.
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Old 07-18-08, 09:34 AM
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Originally Posted by grundle
What other options would you have liked to see in my poll?
[x] <i>The Wall Street Journal</i> editorial page is full of partisan hacks.
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Old 07-18-08, 09:37 AM
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State income tax rates:
http://www.taxadmin.org/fta/rate/ind_inc.html
State unemployment rates:
http://www.statemaster.com/graph/eco...mployment-rate

Now all we need is for wendersfan to graph the correlation.
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Old 07-18-08, 09:40 AM
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Originally Posted by grundle
Did you see this part that I bolded?
Yes, I even read the parts you didn't bold. The premise of the entire article is laughable. So what if Toyota is building a plant in Mississippi. This has nothing to do with "brain drain", because (and I'm sorry if this comes across as harsh, but it can't be helped) no educated person wants to move to Mississippi. The schools are lousy, the people there are uneducated, there's nothing to do, and the weather sucks. It's the shithole of the country, and I say that as someone who was born in West Virginia and grew up in Kentucky, so I know a little something about shitholes.
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Old 07-18-08, 09:42 AM
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Biloxi's not bad though. At least when it isn't getting demolished by hurricanes.
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Old 07-18-08, 09:48 AM
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Originally Posted by wendersfan
It's the shithole of the country, and I say that as someone who was born in West Virginia and grew up in Kentucky, so I know a little something about shitholes.
Don't forget to list your current neighborhood.
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Old 07-18-08, 09:50 AM
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what's not in the article is that california is considering scrapping it's R&D tax credit which is the reason for Silicon Valley's existence. that will be a real brain drain if it happens.
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Old 07-18-08, 09:50 AM
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Originally Posted by wendersfan
Yes, I even read the parts you didn't bold. The premise of the entire article is laughable. So what if Toyota is building a plant in Mississippi. This has nothing to do with "brain drain", because (and I'm sorry if this comes across as harsh, but it can't be helped) no educated person wants to move to Mississippi. The schools are lousy, the people there are uneducated, there's nothing to do, and the weather sucks. It's the shithole of the country, and I say that as someone who was born in West Virginia and grew up in Kentucky, so I know a little something about shitholes.
how many educated people work on a manufacturing line? except for the manufacturing economy idealists here.
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Old 07-18-08, 09:54 AM
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Originally Posted by printerati
Don't forget to list your current neighborhood.
Hey! I live in the 27th most walkable neighborhood in the country.

Originally Posted by al_bundy
how many educated people work on a manufacturing line?
Which is why I pointed out that has nothing to do with a "brain drain". Rather than build a plant in some third world country outside the US, Toyota is merely building one in a Third World country inside the US.
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Old 07-18-08, 10:04 AM
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Originally Posted by wendersfan
The Wall Street Journal editorial page seems really scared of Barack Obama.

You know what also causes "brain drain"? Not having public services, good public schools, nice parks, and other government funded niceties that are enjoyed by educated people.
This hasn't caused a "brain drain" in Washington D.C. Also there is little to zero correlation between state income tax rates and the quality of the public schools in those states.
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Old 07-18-08, 10:07 AM
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Originally Posted by orangecrush18
This hasn't caused a "brain drain" in Washington D.C.

Yeah but there are a lot of excellent public schools just outside DC in Northern Va. and Montgomery Co., Md., and this is where most of the 'brains' of the DC Metro area actually live.
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Old 07-18-08, 10:10 AM
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Originally Posted by Red Dog
Yeah but there are a lot of excellent public schools just outside DC in Northern Va. and Montgomery Co., Md., and this is where most of the 'brains' of the DC Metro area actually live.
I just don't think that lack of good public schools are going to cause a rich smart person to leave a state. They will just send their kid to a good private school.
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Old 07-18-08, 10:10 AM
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I don't think we can consider Washington DC as representative of anything (oh, the irony).
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Old 07-18-08, 10:12 AM
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Originally Posted by orangecrush18
I just don't think that lack of good public schools are going to cause a rich smart person to leave a state. They will just send their kid to a good private school.

Judging how well-educated professional friends of mine in the DC area who have young children have looked at houses, I'm inclined to say that the quality of the public schools in the area is a big factor. Private schools are very expensive, even for well-educated professionals.
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Old 07-18-08, 10:13 AM
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Originally Posted by orangecrush18
I just don't think that lack of good public schools are going to cause a rich smart person to leave a state. They will just send their kid to a good private school.
I work with a lot of people who are working on their doctorates. For those with families, moving to a state and a community that has a good school system (and a general cultural attitude that's positive towards education) is at the top of their list when considering job offers. A good private school in a place with no other cultural or educational opportunities usually isn't enough.
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Old 07-18-08, 10:24 AM
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Originally Posted by grundle
last week Toyota announced it is canceling plans to build its new Prius hybrid at its plant in the San Francisco Bay area because of the high tax and regulatory costs. Adding to the humiliation is that Toyota will now take this investment and about 1,000 jobs to a more progressive and pro-business state: Mississippi.

When will the Mississippi plant be opening? I want to buy puts on Toyota.
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Old 07-18-08, 10:32 AM
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Originally Posted by wendersfan
Hey! I live in the 27th most walkable neighborhood in the country.
I don't think you do, unless you've moved recently.

http://walkscore.com/rankings/walkers-paradises.php
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Old 07-18-08, 10:37 AM
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Originally Posted by orangecrush18
I just don't think that lack of good public schools are going to cause a rich smart person to leave a state. They will just send their kid to a good private school.
I tend to agree with that and would add that you don't even have to be rich to send your kids to private school.

Most public schools around where I live are pretty good. The schools in my particular city are notoriously bad, but I really like living where I do (until my brain drains away from California entirely which probably won't be that long from now due to taxes -- the Nevada side of Lake Tahoe or Island of Hawaii are pretty nice places for it to drain to.) So we send our son to private school as do many other middle-income parents here, and a good number who even live in decent school districts. The cost of private school is enough that you notice it and it restricts your other spending but it's not something that only rich people can afford.
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Old 07-18-08, 10:37 AM
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Originally Posted by JasonF
I don't think you do, unless you've moved recently.

http://walkscore.com/rankings/walkers-paradises.php
I guess you're right. My neighborhood scored an 89.

ETA: I misread another list on that site - I live in the most walkable neighborhood in the 27th most walkable city. Doh!
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