He’s right that as the America’s vanguard of the Pacific rim economy the recession shouldn’t be hurting us this bad, but the gutting of public infrastructure is taking its toll on the economy.
From today’s column:
The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.
The result was a tax system that is both inequitable and unstable. It’s inequitable because older homeowners often pay far less property tax than their younger neighbors. It’s unstable because limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions.
Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.
I wish he’d expanded a bit before drawing parallels with national politics, but it’s a point that has to be made. It’s not that we’re spending too much. As the fourth largest economy in the world, we’re not spending enough to support it. Sometimes the tough choices have to be made and the voters of the last generation have pretty much taken the choice away.
32 comments
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May 25, 2009 at 6:10 pm
Moonshadow
He said exactly what I have been saying for years and years!
Something I might add has caused many derisive remarks to be directed my way. It is nice to have a Nobel Prize winning PhD journalist say the same thing! I feel vindicated.
May 25, 2009 at 7:11 pm
Fred Mangels
All three of you are insane, Eric.
May 25, 2009 at 7:18 pm
Eric Kirk
Yeah, I imagine you see things a little differently Fred.
May 25, 2009 at 7:18 pm
Moonshadow
Hey Fred how ’bout offering some evidence to support your statement?
Tell us why it is insane.
May 25, 2009 at 8:11 pm
anon
also, californians vote tough penalties like three strikes–ok, so how you going to pay for it now?…(pizza anyone?)…
May 26, 2009 at 5:53 am
Anonymous
Eric, it is not that the rates aren’t high enough, there just isn’t enough taxable income. See Dan Walters column today:
http://www.sacbee.com/342/story/1890977.html?storylink=omni_popular
May 26, 2009 at 6:38 am
Fred Mangels
We’re one of the highest taxed, if not the highest taxed, state in the nation. At what point do you think we’d be paying too much of our income in taxes?
May 26, 2009 at 7:15 am
Moonshadow
Responding to your comment about taxes Fred . . . it is like this, we (all the people of the state) have committed to the expenditures that resulted in that indebtedness . . . AND . . . we created a tax system that was unable from the beginning to support that debt. Sounds a lot like a liars loan to me.
While I agree that something had to be done about the rapidly escalating property tax bills that were at the root of Prop 13, what Prop 13 did was to break the system further. We went from having a system that funded our expenditures and kept California largely out of debt to one where the state has sunk deeper and deeper into debt because revenues can no longer keep pace.
You argue that the taxes are too high . . . I might point out that in the pre Prop 13 realm the taxes escalated not so much because of out of control spending but rather because of escalating home values. That tells me the way our capitalist system assigns values to real property (particularly residential) is what is broken.
WE THE VOTERS are the blame for the overwhelming majority of the debt in the California budget . . . we voted for all that, now we have to pay for it all. AND we voted Prop 13 in, which broke the property tax system.
Don’t tell me you didn’t vote for it, so you shouldn’t have to pay for it. You are a citizen of this state and are bound by the outcomes of our elections regardless of which way you voted.
May 26, 2009 at 7:41 am
Bruce Ross
I’ve seen calculations that if Gray Davis’ increase of the car tax had remained in place in 2003 — and nothing else changed — the state’s finances would be in reasonable shape. This recession, of course, would still be awful, but the state government wouldn’t be starting it in such ragged condition.
So here’s a case where you really can at least partly the anti-tax fundamentalism, combined with an easy populism. That higher car tax had been place for the entire Age of Automobiles, until the late 1990s, and when it was cut the law explicitly allowed it be increased again when state revenues fell short. But when Gray Davis pulled the trigger — bam! — “largest tax increase in California history!”
May 26, 2009 at 7:55 am
Mr. Greenjeans
My question was addressed to Fred.
May 26, 2009 at 7:56 am
Mr. Greenjeans
Do you have a link or something to support your claim or did you just pull it out of your ass.
May 26, 2009 at 8:28 am
Moonshadow
Heh . . . I figured as much!
May 26, 2009 at 8:35 am
Jim
Eric, we are now closer to the 10th largest economy at this point, not 4th.
Check the wikipedia page with legit references.
Fred, this is a yacht party fallacy, we are not the most taxed state by any means.
“By one measure, at least, California isn’t No. 1 in taxes overall: A Tax Foundation study last year that looked at the combined state and local tax burdens shouldered by Americans ranked the Golden State No. 6, after New Jersey, New York, Connecticut, Maryland and Hawaii.”
and here is the study
http://www.taxfoundation.org/taxdata/show/336.html
We were actually #4 in 1977, so prop 13 has kicked our taxes down over the last three decades.
Get a clue Fred, think for yourself for once, eh?
Oh, and on taxes, I would think a better republican argument would be to look at why the feds take all our tax money and spend it in rural states. We donate our federal tax money to the rest of the nation, how about an argument for some equity for our large economy.
http://www.taxfoundation.org/taxdata/show/22685.html
May 26, 2009 at 6:34 pm
Fred Mangels
Jim wrote, “California isn’t No. 1 in taxes overall …and local tax burdens shouldered by Americans ranked the Golden State No. 6, after New Jersey, New York, Connecticut, Maryland and Hawaii.”.
And you think that’s just fine? In other words, as Eric and others seem to think: Government should be the first priority?
May 26, 2009 at 6:45 pm
Fred Mangels
Bruce wrote, “…I’ve seen calculations that if Gray Davis’ increase of the car tax had remained in place in 2003 — and nothing else changed — the state’s finances would be in reasonable shape.”.
Not sure about that. What I’ve heard is that if they had simply raised spending to account for inflation and population growth back during the 2001/ 2002 budget, we’d have had 10 or 20 billion dollars in surplus.
As it was, they spent every penney of that surplus, and more. 20,000 new state employees, and a number of new spending projects.
Sure, they also sliced the Vehicle License Fee, but I’d say that, at some point, it makes sense to return surplus money back to the taxpayers.
Others don’t, like Eric and CPR. They think government comes first and above any other considerations.
May 26, 2009 at 6:47 pm
Fred Mangels
Ooops. I think that should of been the 2000/ 2001 budget I was referring to.
May 26, 2009 at 6:50 pm
Eric Kirk
If by “government” you means schools, hospitals, police forces, social services, and road maintenance, then yeah, I do prioritize it pretty high. Everything’s at bare bones right now. We’ve closed parks and museums. We’ve cut library hours to the point where there’s no point in opening them at all. And the school buildings are falling apart around our kids.
May 26, 2009 at 6:59 pm
Moonshadow
That depends on what the tax money is paying for. If it is paying for needed and essential services such as, water & sewer infrastructure, public transportation, roads, police and fire (ie: public safety), education, public health, and yes even the social safety net known as welfare, then I’m all for it.
May 26, 2009 at 7:06 pm
Moonshadow
Well if you feel that way . . . perhaps you should forego the use of any of the government service you don’t want to pay for.
Seems to me you just want the services but don’t care to pay for them.
May 26, 2009 at 10:34 pm
Jim Glass
Actually if you look at the Tax Foundation data you will see that for 2007 it says — measuring taxes paid by residents to their own state as a percentage of their income — California ranked tied for #2 with New Jersey, after only New York.
C’mon — second highest taxes in the nation, grossly under taxed?
This is a state that pays more than 3,600 prison guards more than $100,00 per year. Prison guards.
Now a curious fact is that these same three highest tax states this year had $65 billion in budget deficits — more than two-thirds of the combined budget gaps faced by all 50 states!
Does that tell is anything? It might!
(And all three states are run entirely by Democrats, governors & both houses of their legislatures, except for Ahnold his self …. so of course it was the Republicans who creates all those deficits!)
May 27, 2009 at 3:54 pm
Moonshadow
Jim . . . are you saying that prison guards do not deserve their pay? It is a rather dangerous profession and as such would seem to deserve premium “hazard” based pay.
May 27, 2009 at 4:48 pm
Anonymous
http://www.job-hunt.org/careers/prison-guards.shtml
are ca prisoners any more dangerous than the other states?
May 27, 2009 at 5:32 pm
Bruce Ross
Fred,
Returning money to the taxpayers isn’t a bad idea — but a permanent tax cut when you know you’ll need the money when the business cycle turns south in a year or three might not be best.
What’s wrong with a rainy-day fund? (Heck, wasn’t one on the ballot recently?) How about Oregon’s “kicker”?
May 27, 2009 at 5:47 pm
Moonshadow
Don’t forget the cost of living in California . . . guards have to pay rent or mortgages, buy food and fuel, purchase insurance, etc. . . . that adds up too. You wouldn’t want to pay them what they get paid in, say, Montana where the cost of living is far less. As I am fond of saying . . . it is all relative.
May 27, 2009 at 5:49 pm
Moonshadow
It makes more sense to be collecting the revenues you need in the first place. That is to say set tax levels at what is needed to fund government operations and mandates.
Personally I think surpluses should be banked rather than paid back to the taxpayers . . . that would be your rainy day fund.
May 28, 2009 at 2:55 am
Mr. Greenjeans
Don’t forget the higher state taxes that they have to pay. Heh
May 28, 2009 at 7:26 am
Anonymous
moonshadow, the ca guards are the highest paid according to the link. almost double what most everybody else is getting. btw, they do collect the revenues they need. then they decide they need more…and then more…and then more…
May 28, 2009 at 11:52 pm
Will
Krugman complains about the small number of Republicans blocking these endless tax hikes, and yet these propositions all went down in flames. What kind of government is he recommending? Dictactorship?
May 28, 2009 at 11:53 pm
Will
I’m sorry, that may not have been clear. He makes it sound like a small fringe is blocking what needs to be done but the overwhelming vote of the actual people told the taxers where to stick it. If that’s not the government he wants, he should live somewhere else (which he does, but you know what I mean).
May 29, 2009 at 2:23 pm
Eric Kirk
Krugman did not support those propositions.
May 29, 2009 at 4:35 pm
Moonshadow
Anonymous . . . what part of, “the cost of living in California” didn’t you understand. It costs more to live here than in many of the other places you’d use for comparison.
The state does not collect enough to cover its expenditures . . . if it did we would not be in this mess.
June 8, 2009 at 11:35 am
David
I lived in California for several years. Paul Krugman is an idiot. It isn’t just the taxes (although $6400 per capita is quite a bit more then Texas’ $3800 per capita per year). Everything else is expensive. Utilities are outrageous because California wants to be green. Costs individuals an extra $100/month. Housing costs are out of sight. Food is more expensive, water, etc. When my wife and I were in California we were paying $1000/month in state income taxes and $1800/month for a two bedroom apartment. In Texas, we pay no income taxes and the equivalent apartmen is well under $1000/month. Everything else is cheaper.
If I was Paul Krugman and was rich, maybe I would think Californians don’t pay enough taxes. But not being rich, the only good strategy is to move out.