The Not-So-Golden State of California(blog.inc.com)
blog.inc.com
The Not-So-Golden State of California
http://blog.inc.com/nolan-bushnell/2009/06/the_notsogolden_state_of_calif.html
37 comments
Do you have any references for your position?
Proposition 13 is not California's problem, read this if you are interested.
http://weblog.signonsandiego.com/weblogs/afb/archives/034048...
Proposition 13 is not California's problem, read this if you are interested.
http://weblog.signonsandiego.com/weblogs/afb/archives/034048...
The guy doesn't know what he is talking about. One of the problems with Prop 13 is that property taxes are limited to 1% increase per year. It gets reset to 1% of the property value when the property is resold. Home taxes have been rising steadily because homes get resold on the average of every 5 years. Commercial property, like oil refineries and office buildings which are not often resold, are stuck at 1978 rates. If commercial properties were revalued every 5 years, local jurisdictions would be in a lot better shape.
The San Diego Union Tribune is a right wing knee jerk paper. Any commentary in it should be taken with a grain of salt.
The San Diego Union Tribune is a right wing knee jerk paper. Any commentary in it should be taken with a grain of salt.
That is an excellent ad hominem attack on the source.
You are incorrect, it is capped at a 2% increase per year and of course is reassessed at 1% of the total property value when the property changes hands.
Of course proposition 13 lowers the income from property taxes for the state, that is the point of it. Do you think the state deserves more than a 579% increase in revenue from property taxes since 1980? No other tax has increased as much.
The truth is the California government doesn't know how to spend within its means. Why do you believe we would be in better shape without prop 13? I'm sure we would have simply increased spending and leveraged out the state more. With the devaluation of homes it would have just hit us harder, representing a larger percentage of our income.
It is easy to claim California would have more revenue without prop 13. That is a prima facie argument. What you need to do is prove that taxpayers should have paid more, that California is responsible enough to have handled the money, and that the burden should be borne disproportionately by property owners more than it already is.
You are incorrect, it is capped at a 2% increase per year and of course is reassessed at 1% of the total property value when the property changes hands.
Of course proposition 13 lowers the income from property taxes for the state, that is the point of it. Do you think the state deserves more than a 579% increase in revenue from property taxes since 1980? No other tax has increased as much.
The truth is the California government doesn't know how to spend within its means. Why do you believe we would be in better shape without prop 13? I'm sure we would have simply increased spending and leveraged out the state more. With the devaluation of homes it would have just hit us harder, representing a larger percentage of our income.
It is easy to claim California would have more revenue without prop 13. That is a prima facie argument. What you need to do is prove that taxpayers should have paid more, that California is responsible enough to have handled the money, and that the burden should be borne disproportionately by property owners more than it already is.
> it is capped at a 2% increase per year and of course is reassessed at 1% of the total property value when the property changes hands.
Actually, the rate can be higher. The rate in Santa Clara county is over 1.5%.
Note that folks who bought more than a couple of years ago will see a property tax increase this year because their assessed value is still lower than their market value. Folks who bought recently are getting a huge cut.
The net result is that property tax revenues are fairly stable.
In the past, huge run-ups in property values did not result in lower rates - the local govts got huge revenue increases. When property values crashed, they raised the rates to maintain steady revenues.
Actually, the rate can be higher. The rate in Santa Clara county is over 1.5%.
Note that folks who bought more than a couple of years ago will see a property tax increase this year because their assessed value is still lower than their market value. Folks who bought recently are getting a huge cut.
The net result is that property tax revenues are fairly stable.
In the past, huge run-ups in property values did not result in lower rates - the local govts got huge revenue increases. When property values crashed, they raised the rates to maintain steady revenues.
> then we made the problem much worse by passing a slew of costly initiatives without being willing to raise the money to fund them fully.
That's simply not true.
CA's spending has increased 20+% more than population and inflation since 2005 or so. Initiatives are not responsible for a significant fraction of that increase (and most of them are self-funding).
Note that the amount of the increase since 2005 is roughly equal to the deficit, so cutting back to then would balance the budget.
I'd argue that none of the new programs and increases since 2005 have been a significant benefit. Those who do think that their new program is essential are invited to find some pre-2005 fat to pay for said program.
That's simply not true.
CA's spending has increased 20+% more than population and inflation since 2005 or so. Initiatives are not responsible for a significant fraction of that increase (and most of them are self-funding).
Note that the amount of the increase since 2005 is roughly equal to the deficit, so cutting back to then would balance the budget.
I'd argue that none of the new programs and increases since 2005 have been a significant benefit. Those who do think that their new program is essential are invited to find some pre-2005 fat to pay for said program.
The rich love to assail Proposition 13 but without it a normal person could not retire in Califronia after working a lifetime in California. The other problems are as you mentioned and are obvious to everyone not in Sacramento.
Helping “normal people” retire was cited as the reason to pass Proposition 13, but the biggest beneficiaries (and the initiative was designed with this in mind, to be sure) were corporate property owners, who because they never get old and die, can never have their property taxes raised (well, it can increase 2% per year, generally less than inflation).
Corporations "die" and then sell the property. K-Mart had more value in property then in it's own business. Granted some corporations are getting a good deal, but in another article here they are getting such a bad deal they are leaving. Corporations benefiting may just be a necessary evil.
Whether or not that is the case, the initiative immediately cut property tax income by 57(?)% and made it much more difficult for the state to raise money by increasing taxes. That's not necessarily a bad thing, but you can't lower taxes without also decreasing spending.
As far as the problem being obvious to "everyone not in Sacramento," clearly you are wrong because here we are, and the voters of California played an active role in bringing us here.
As far as the problem being obvious to "everyone not in Sacramento," clearly you are wrong because here we are, and the voters of California played an active role in bringing us here.
The home value is reset when a house is sold. There has been a lot of buying and selling lately in California.
I have a friend who recently bought a house and his property taxes are like rent, it is just that expensive. He could rent a 1 bedroom apartment with his property taxes.
Money is coming in but as you said, too much money is being spent (through ballot intiatives (high speed rail for example) and the legislature gone-wild. But I believe that the gone-wild days have come to an abrupt end and mostly thanks to Schwarzenegger who has nothing to loose by being rational.
I have a friend who recently bought a house and his property taxes are like rent, it is just that expensive. He could rent a 1 bedroom apartment with his property taxes.
Money is coming in but as you said, too much money is being spent (through ballot intiatives (high speed rail for example) and the legislature gone-wild. But I believe that the gone-wild days have come to an abrupt end and mostly thanks to Schwarzenegger who has nothing to loose by being rational.
I have a friend who recently bought a house and his property taxes are like rent, it is just that expensive.
Yes, his property taxes are probably higher than they would be without Proposition 13, because he's subsidizing those around him who have owned their homes for twenty or thirty years, and aren't paying their fair share.
Yes, his property taxes are probably higher than they would be without Proposition 13, because he's subsidizing those around him who have owned their homes for twenty or thirty years, and aren't paying their fair share.
Unfortunately, Proposition 13 is a lot broader than merely allowing retirees to stay in their homes. The tax breaks can be passed on to children if they take over the house, essentially creating a privileged and heritable class of homeowners. And it also applies to properties owned by companies, which has nothing to do with people being able to stay in their homes.
If property taxes on residences are too high, they should be lowered across the board. Of course, this means that either spending will need to be lowered, or the money will need to be gained through some other form of taxation.
If property taxes on residences are too high, they should be lowered across the board. Of course, this means that either spending will need to be lowered, or the money will need to be gained through some other form of taxation.
Although I'm a fan of Nolan Bushnell, this kind of blog posting is so lacking in content as to be useless. So regulation is onerous in California - fair enough. When did the burden of regulation reach a tipping point that made it too much of a handicap? how was it in the old days? What regulations, specifically, are the problem - taxation, employment law, consumer safety, or what?
California's government is the problem. The state is business-hostile. It is merit-hostile. It has the highest tax rates and returns less in services to its average citizens. Massive pension abuses are not dealt with.
One wonders if California's emphasis on citizen democracy is at the root of the problem. It's certainly left us with the best democracy that money can buy, which turns out to be a pretty bad one.
California's government is the problem. The state is business-hostile. It is merit-hostile. It has the highest tax rates and returns less in services to its average citizens. Massive pension abuses are not dealt with.
One wonders if California's emphasis on citizen democracy is at the root of the problem. It's certainly left us with the best democracy that money can buy, which turns out to be a pretty bad one.
> California's emphasis on citizen democracy
Yeah, but there are much better ways to do it. I'd recommend a substantial decrease in the Citizen / Legislator ratio. That gives regular citizens greater access to their legislature, while giving its members the power and responsibility necessary for them to invest themselves in its decisions, and make a more direct case to the constituency for the more responsible policy decisions.
For example New Hampshire has
* 400 representatives for
* 1.3 million people, or roughly
* 3,000 constituents/legislator (illustrated: http://www.biblebaptistchurchmoldova.com/evangelism/images/m...)
Meanwhile, California has only
* 80 representatives for
* 38 million people, or roughly
* 475,000 constituents/legislator (illustrated: http://kashmirwatch.com/postnews/data/upimages/eidgah22aug2....)
New Hampshire citizens have over 150x the access to their state representatives, and those 400 legislators have 5 times the personal experience with laws and regulation to bring to the table.
Now you may say it's crazy to suggest that California should have 12,000 state legislators, but I disagree. The practicalities which have capped large-scale decision-making have largely been wiped away with the invention of modern electronic communication. And having those 12,000 means you could keep them in their home neighborhoods, rather than call them out to Albany. This way there's always someone within a reasonable distance that you can speak to directly.
Interestingly, with the position California is in, I'd think this idea (or a more moderate version of it, say 2,000 legislators) might have a chance at making it. That is, if people make a serious push for it in the new constitution.
Yeah, but there are much better ways to do it. I'd recommend a substantial decrease in the Citizen / Legislator ratio. That gives regular citizens greater access to their legislature, while giving its members the power and responsibility necessary for them to invest themselves in its decisions, and make a more direct case to the constituency for the more responsible policy decisions.
For example New Hampshire has
* 400 representatives for
* 1.3 million people, or roughly
* 3,000 constituents/legislator (illustrated: http://www.biblebaptistchurchmoldova.com/evangelism/images/m...)
Meanwhile, California has only
* 80 representatives for
* 38 million people, or roughly
* 475,000 constituents/legislator (illustrated: http://kashmirwatch.com/postnews/data/upimages/eidgah22aug2....)
New Hampshire citizens have over 150x the access to their state representatives, and those 400 legislators have 5 times the personal experience with laws and regulation to bring to the table.
Now you may say it's crazy to suggest that California should have 12,000 state legislators, but I disagree. The practicalities which have capped large-scale decision-making have largely been wiped away with the invention of modern electronic communication. And having those 12,000 means you could keep them in their home neighborhoods, rather than call them out to Albany. This way there's always someone within a reasonable distance that you can speak to directly.
Interestingly, with the position California is in, I'd think this idea (or a more moderate version of it, say 2,000 legislators) might have a chance at making it. That is, if people make a serious push for it in the new constitution.
There are some interesting ideas there. I'm not in favor of the sometimes-suggested solution of splitting CA up into smaller states, but along these lines, I can't argue with the observation that our US senators 'represent' about 19 million people each, whereas a senator from Montana represents fewer than half a million.
The problem with our legislature is three fold.
1) We have safe political districts.
The political districts are uncompetitive in the general elections.
The only worry they have in getting reelected is if they don't appeal to the core of their party and are opposed in the primary.
This leads to the most active, the most idea logical and the more fringe elements of the party deciding who our representatives will be.
The people being elected are unwilling to compromise and so cannot find practical solutions.
2) We have term limits.
The politicians do not have institutional memory and do not seek long term solutions to the problems.
They are looking to move up to a more powerful position or at least they want to return home with a greater network of connections.
So they spend every dime they can find and borrow as much as they can and are not there when the bills come due.
The lobbyists do have institutional memories and are seeking long term solutions to their problems, not what is in the best interest of the state.
3) Proposition 13
Prop 13 was a tax-cutting measure that took care of the problem of property taxes skyrocketing as home values skyrocketed.
This caused people to not be able to afford their homes any longer, not because they couldn't pay the mortgage, but because they couldn't pay the taxes .
But it hit local governments especially hard. Key budgeting authority devolved from cities and counties up to Sacramento, where they have to compete with the state government for money. You want your streets paved or more teachers for your third grade? Stand in line behind the health department, or the corrections department, or Caltrans.
And then the state borrows (takes?) the money it is supposed to send back to the cities and counties for it's own uses.
California is not ungovernable -- it's just been ungoverned.
An excellent post.
As we all know, there are times when it no longer makes sense to keep maintaining legacy code which has begun to collapse under its own weight. In that spirit, I invite HN readers to look into the Bay Area council's proposal for a constitutional convention: http://www.repaircalifornia.org/index.php
Politics is an awkward subject, as evidenced by the often febrile debates here over libertarianism, the role of government and so forth. But those of us who are residents of California owe a lot to the state - not to be confused with The State - and as hackers, pride ourselves on having the energy and insight to make things work better. Rewriting our socioeconomic source code is a messy and likely thankless task, but no less worthy of our participation for that.
As we all know, there are times when it no longer makes sense to keep maintaining legacy code which has begun to collapse under its own weight. In that spirit, I invite HN readers to look into the Bay Area council's proposal for a constitutional convention: http://www.repaircalifornia.org/index.php
Politics is an awkward subject, as evidenced by the often febrile debates here over libertarianism, the role of government and so forth. But those of us who are residents of California owe a lot to the state - not to be confused with The State - and as hackers, pride ourselves on having the energy and insight to make things work better. Rewriting our socioeconomic source code is a messy and likely thankless task, but no less worthy of our participation for that.
I forgot to mention one more item. It takes a 2/3 vote to pass the budget. 50% + 1 makes much more sense. At this point I'd take 60% as much better solution.
Oh really? You think that 50% of the legislature would spend less than 60% would and that 60% would spend less than 66%?
I think that even if we had politicians capable of putting together a well conceived plan, a relatively small group can effectively veto any budget.
That may be true, but the actual claim was that the Repubs blocked something good. If so, we'll find said "something good" in Dem proposals.
How many Dems were advocating 2005 level spending? How many Dems were willing to say "we'd love to have all these new programs but since we can't get the revenue, we're going to delay them or cut something else?"
I'd love to be making 25% more than I actually am, but is it responsible to spend that way? If not, why are Dems off the hook?
How many Dems were advocating 2005 level spending? How many Dems were willing to say "we'd love to have all these new programs but since we can't get the revenue, we're going to delay them or cut something else?"
I'd love to be making 25% more than I actually am, but is it responsible to spend that way? If not, why are Dems off the hook?
California has some of the highest tax rates in the nation and is 48th in the nation in terms of business tax competitiveness.
http://www.taxfoundation.org/files/bp58.pdf
http://www.taxfoundation.org/files/bp58.pdf
So what? This is not a new condition, so one would have expected it to have some significant impact by now if this was really a factor to anyone outside of the "I got mine so screw you" set. Yet California's economy is still overwhelmingly larger than that of any other state in the nation. If the costs of operating in California were not outweighed by the benefits you would have expected businesses to flee the state and not be replaced; this hasn't happened yet and the odds favor California coming out of the recession at the same pace as the rest of the country.
Exactly. California is, hands down, the innovation capital of the world, and has been for decades. Whatever lunacy the political winds are blowing these last few years doesn't undo the accomplishments of the last 100 years: the movie industry, microchips, software (both desktop and internet) to name a few. Entire sectors of the world economy were born there. More than a few cultural movements started there too if the argument can be extended beyond business and tech innovation.
What is really sad in California is the cost of higher education. In the mid 80s, U.C.S.D cost me about $400 per quarter (which covered health insurance), plus I had to come up with another $300/month on rent. My summer job as a Domino's Pizza guy (at $10/hr after tips) and my part time job throughout the year as a high school teacher's assistant ($7/hr) covered most of my expenses for the year. Folks worrying about California should be looking at the cost of education, and the impact that that might have on innovation.
What is really sad in California is the cost of higher education. In the mid 80s, U.C.S.D cost me about $400 per quarter (which covered health insurance), plus I had to come up with another $300/month on rent. My summer job as a Domino's Pizza guy (at $10/hr after tips) and my part time job throughout the year as a high school teacher's assistant ($7/hr) covered most of my expenses for the year. Folks worrying about California should be looking at the cost of education, and the impact that that might have on innovation.
I'm not sure about the 'citizen democracy' part... Did citizen democracy come up with the crazy electricity market system?
(I'm not familiar enough with California - But if it did, you got what you deserved :-))
(I'm not familiar enough with California - But if it did, you got what you deserved :-))
I was more thinking of the property tax caps (which may not have been such a good idea, but are hard to change) and the fact that you can get just about any old BS onto the ballot with 500,000 signatures, which you can collect for 1-2 million. Meantime, it takes 2/3 of the legislature to pass a budget and it's been late something like 17 out of the past 18 years. I do approve of the idea of ballot initiatives, but between one thing and another it's made our state terribly unwieldy to govern.
This was probably the best article on the topic. http://www.economist.com/world/unitedstates/displayStory.cfm...
Posted here: http://news.ycombinator.com/item?id=645478
Posted here: http://news.ycombinator.com/item?id=645478
Paraphrasing something I heard on NPR...
California is the 8th largest economy in the world. We have the world's most productive agricultural region, two of the world's top universities, the largest port in the US, Hollywood, Silicon Valley, and tourism.
WHY THE HELL CAN'T WE MAKE IT WORK?
California is the 8th largest economy in the world. We have the world's most productive agricultural region, two of the world's top universities, the largest port in the US, Hollywood, Silicon Valley, and tourism.
WHY THE HELL CAN'T WE MAKE IT WORK?
Because we expect too much for what we pay in taxes, add to that we also elect some of the dumbest people into office.
"We have the world's most productive agricultural region"
I doubt that California can beat hi-tech farms in Brazil and South Africa. The climate is good, but not that good.
"two of the world's top universities"
It's more like three: Caltech, Stanford, Berkeley. The other UC schools are quite good too. For instance, UCLA is strong in math, while UCSB is strong in physics, etc.
I doubt that California can beat hi-tech farms in Brazil and South Africa. The climate is good, but not that good.
"two of the world's top universities"
It's more like three: Caltech, Stanford, Berkeley. The other UC schools are quite good too. For instance, UCLA is strong in math, while UCSB is strong in physics, etc.
Is there any good source of data about the best place to start a company?
Surely what you want is the best data about good places to start a company.
The real answer: it depends on your criteria. Delaware is the cheapest place to incorporate, but nobody knows where it is. Nevada is the best place if your business involves lots of cash and/or hookers. Silicon valley may still be the best if you want to meet like-minded geeks. Hollywood stays in LA both for the infrastructure and the weather. Michigan has great incentives right now if you don't mind the cold winters...see the problem?
The real answer: it depends on your criteria. Delaware is the cheapest place to incorporate, but nobody knows where it is. Nevada is the best place if your business involves lots of cash and/or hookers. Silicon valley may still be the best if you want to meet like-minded geeks. Hollywood stays in LA both for the infrastructure and the weather. Michigan has great incentives right now if you don't mind the cold winters...see the problem?
If you are reliant on programmers/developers Canada is a great place to make a start up. Very tech-friendly and all those health care costs are offloaded to your workers' personal taxes. Toronto has high property tax, but very near by Mississauga and Thornhill have a ton of smart people and very low taxes, Waterloo is good too. Best of all these guys cost far less (in USD) than Seattle or Silicon Valley programmers.
Most of the governments in Canada (National, Provincial, and Municipal) are solvent, even in net-present-value terms, and crime and corruption is astoundingly low.
If you are hoping to sell off the company quickly, incorporate both in Delaware AND Canada and figure out how to sell the services through the Delaware office, so when it comes time for the acquisition you can easily be bought out by American interests.
Most of the governments in Canada (National, Provincial, and Municipal) are solvent, even in net-present-value terms, and crime and corruption is astoundingly low.
If you are hoping to sell off the company quickly, incorporate both in Delaware AND Canada and figure out how to sell the services through the Delaware office, so when it comes time for the acquisition you can easily be bought out by American interests.
[deleted]
California's problem is that we keep on spending money like it's flowing in like water, yet the flow was greatly reduced 30 years ago with the passage of proposition 13. Instead of trying to live within our means, we voted people into office who either wanted to spend more, xor reduce taxes and then we made the problem much worse by passing a slew of costly initiatives without being willing to raise the money to fund them fully. So here we are. The governor screwed us, the state senate and legislature screwed us, but ultimately, we screwed ourselves, and now we're going to have to pay for it.
As someone who lived most of my 38 years in this state, went to UC, and has the joy of living in one of the most beautiful places on earth, it makes me profoundly sad to see what we have done to ourselves.