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Monday, December 10, 2012

What we have here is a failure to connect

Cause and effect:
Despite Tax Increase, California State Revenues in Freefall.

California State Controller John Chiang has announced that total state revenue for the month of November 2012 fell $806.8 million, or 10.8%, below budget.  Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it now appears that high income earners have already “voted with their feet” by moving themselves and their businesses out of state, resulting in over $1 billion shortfall in corporate and income taxes last month and the beginning of a new financial crisis.  
What a tremendous surprise!  I figured out the fundamental flaws in the static revenue model used by the Minnesota state government when I was a junior in high school, by the exotic means of reading the Minneapolis Star-Tribune and remembering what was supposed to happen when tax rates were raised.  At least twice, there was an "unexpected" revenue shortfall as tax hikes failed to bring in the anticipated revenue.  Being of the "This is Spring Break so it must be Naples" class, I was more aware than most that the better-off Minnesotans tended to simply move to Florida when their taxes became onerous. So, it was pretty obvious that the flaw in the static model was that it failed to take human reaction to the increased rates into account.

If a high school junior who isn't even paying direct attention to the subject can figure it out in passing, you would think someone in the California government could do so as well.

The remarkable thing is that this just happened two years ago in Maryland, where one-third of the state's millionaires disappeared from the tax rolls after a special surtax on them was devised.  What were the Californians thinking, rich people in California behave differently than rich people in Maryland?  Actually, considering the Californians I've known over the years, I suppose that's entirely plausible.

Regardless, you have to love that "Despite" in the title.  It's almost sad how little it takes to make me happy.

73 Comments:

Anonymous Mr. Nightstick December 10, 2012 2:37 PM  

Remember when Tad posted that article from the NY Times about how California is doing better. That was funny!

Anonymous Azimus December 10, 2012 2:39 PM  

To be fair to was a proto-genius junior in high school.

Anonymous kh123 December 10, 2012 2:42 PM  

Ca state institutions move with about as much thoughtfulness as a bodily function.

Anonymous Azimus December 10, 2012 2:43 PM  

I for one think Cali should follow the Federal model and declare that even 7yrs after changing residence to a different state, you still owe Cali income tax on your wages.

That would solve everything!

Anonymous Mr Green Man December 10, 2012 2:46 PM  

That's why part of Mrs. Clinton's message, when not begging for bond purchases abroad, is to badger governments to raise their taxes to take away the option of running. See for example what she said to Pakistan before the drone bombing runs about how they were uncivilized and their income tax rates were too low.

Anonymous workingman December 10, 2012 2:50 PM  

Of course when it comes to austerity it's the other side that doesn't get it. Cuts in spending lead to greater deficits. But were supposed to be extra careful when it's John Galt's (that's who they like to think of themselves as, anyway) money we're cutting into.

What can we say, idiots all around.

Anonymous Axe Head December 10, 2012 2:52 PM  

Hotel California, coming soon. Fence around the whole state. Anyone can enter, no one can leave. Please, California, do it.

Anonymous BluntForceTrauma December 10, 2012 2:54 PM  

Never ceases to amaze me how we have morons, nay, idiots, runnning things.

Anonymous JI December 10, 2012 2:57 PM  

I've never met a liberal yet who understood this concept. Wonder what Krugman thinks about this...

Anonymous patrick kelly December 10, 2012 3:05 PM  

" Cuts in spending lead to greater deficits."

I would be highly skeptical of any mathematical contortions necessary to demonstrate this.

Blogger Trust December 10, 2012 3:05 PM  

Interestingly, I remember learning about the Latter Curve at a Christian high school. But it was never mentioned in college or graduate school class.

Blogger Trust December 10, 2012 3:06 PM  

Errr Laffer Curve. Damn autocorrect.

Blogger Res Ipsa December 10, 2012 3:10 PM  

The tragic thing is all these tax refugees from California will move to neighboring states where they will immediately state agitating for the exact same system they had in California until they ruin those states too. Just like they did to Colorado Washington and Organ in the 70’s and 80’s and just like they did to Montana and Idaho in the 90’s till now. Freaking Californian’s are a blight on America and they should all be deported to Cuba immediately.

Blogger IM2L844 December 10, 2012 3:12 PM  

I thought the mindset that the opening a 99 cent store on Rodeo Drive in Beverly Hills as a welcome indicator of more good things to come was particularly telling. Talk about shooting yourself in the foot every chance you get...

Anonymous Heh December 10, 2012 3:12 PM  

California Democrats are still in denial -- "people looooove the California weather and lifestyle so much, no way would they move no matter how much we charge them to live here!"

Anonymous Godfrey December 10, 2012 3:13 PM  

The answer is to raise taxes even higher!... 50%, 80%, 100%... 120%! Keep pounding until reality and common sense yield!

Anonymous Anonymous December 10, 2012 3:20 PM  

No...because the people who want to leave California are TAX PAYERS. The idiots who vote these increases are in Los Angeles and San Francisco and little dumps around the state where they live off the govt. They don't leave.

Anonymous stg58 December 10, 2012 3:25 PM  

@Workingman,

I am confused. How does spending less money lead to owing more money?

Anonymous stg58 December 10, 2012 3:25 PM  

@Workingman,

I am confused. How does spending less money lead to owing more money?

Anonymous patrick kelly December 10, 2012 3:27 PM  

Some of those "tax payer" refugees seem to suffer from a bit of cognitive dissonance, not making the connection between some of the cool "free" stuff they liked about California and the high taxes they paid. When the get to their lower tax promised lands, they start missing all this "free" stuff and demand it from their new location.

Blogger Tim December 10, 2012 3:28 PM  

I am shocked that this didn't work the millionth time it was tried!

When will the rest of us realize that they will never learn?

Anonymous patrick kelly December 10, 2012 3:29 PM  

"I am confused. How does spending less money lead to owing more money?"

I'm guessing it has to do something with math being hard, raciss!!, oppressive, regressive, evil, mean, nasty, and foul smelling.

Anonymous AlteredFate December 10, 2012 3:29 PM  

"Cuts in spending lead to greater deficits." -workingman

Tad must be using a different screen name today. Please explain then, you illiterate imbecile, how exactly your system of bizarro math works? Or do you just "wing it" whenever presented with a problem? There is no way you CAN'T be a troll because anyone that stupid would be unable to regulate their own breathing.

Blogger RobertT December 10, 2012 3:34 PM  

I have a number of high income clients living in California, and they do think different. The complain about the taxes and then they get to the weather and suddenly they're in la la land. How brainwashed do you have to be to get nostalgic about the weather in San Francisco?

Blogger RobertT December 10, 2012 3:34 PM  

I have a number of high income clients living in California, and they do think different. The complain about the taxes and then they get to the weather and suddenly they're in la la land. How brainwashed do you have to be to get nostalgic about the weather in San Francisco?

Blogger Giraffe December 10, 2012 3:37 PM  

Cuts in spending lead to greater deficits.

Nominated for dumbest VP comment of 2012.

Anonymous DonReynolds December 10, 2012 3:40 PM  

My guess is that thousands of wealthy persons took a plane ride to Puerto Rico and rented a cheap apartment and a post office box, thus establishing a new residence. In PR they pay no income tax, no Medicare tax, and no California income tax. The savings would be much greater, I suspect, than two round-trip airline tickets a year to touch base....probably during the winter months....and maybe combine it with a short hop to the American Virgin Islands.

I cannot help but laugh at the stupidity of populist politicians trying to tax the MOST MOBILE segment of our society. The wealthy individuals are not stuck anywhere and there are several places where they can be in the USA without being in a state. California is obviously toast.

Anonymous DonReynolds December 10, 2012 3:45 PM  

RobertT..."How brainwashed do you have to be to get nostalgic about the weather in San Francisco?"

I spent the last week of June in San Fran and the weather was awful. It did not get above 50 degrees the whole time I was there and drizzle rained every day but the last day. How can anyone miss that kind of weather in June-July? The warmest month in San Francisco is September!

Now less than a hundred miles inland from San Fran was the desert, where the temp was over 100 degrees every day, but not many people lived there.


Anonymous Noah B. December 10, 2012 3:48 PM  

The only surprise here, for me, is that this announcement came so quickly. I guess Johnny Chiang is panicking and trying to put the blame back on Brown as soon as he can.

And what is BLOOMBERG doing reporting this? Didn't they get the memo that they're not supposed to speak badly of tax rate hikes?

Blogger tz December 10, 2012 3:58 PM  

I liked MN. Especially when I was laid off since it had exorbitant unemployment compensation. There is only one Cracker Barrel (on I35 a bit south of the twin cities) - probably because of the socialism. Sigh.

It was a few weeks ago that Jim Puplava on his financial sense newshour chronicled his friend Mark that a short time ago considered packing up and heading for the border. He got a call 2am election day - it was Mark. He is leaving and taking his company with him. We should give CA back to Mexico. Actually, impose it on them.

Moochers immigrating. They need the illegals, I mean "undocumented" since they are the only ones who can afford to work there since they don't pay taxes. Taxpayers emigrating.

I wonder how Apple engineers feel about being stranded in their spaceship in a hostile location. Google too. It might be cheaper to build an Archology in the snowbelt. ND is a net energy producer.

Anonymous Ain December 10, 2012 4:09 PM  

"I for one think Cali should follow the Federal model and declare that even 7yrs after changing residence to a different state, you still owe Cali income tax on your wages.

That would solve everything!"

They would if they could. They even go through peoples' garbage to see if they've really moved out of the state.

Anonymous Toddy Cat December 10, 2012 4:46 PM  

Next NYT headline: "Despite Beatings, Morale Fails to Improve!"

Anonymous Porky? December 10, 2012 4:46 PM  

Hilarious! Sacramento's budget was actually counting on a humongous bonanza of cash from Facebook's amazing IPO.

Oops.

Blogger The Deuce December 10, 2012 4:49 PM  

VD:

So, it was pretty obvious that the flaw in the static model was that it failed to take human reaction to the increased rates into account.

And it's just supply and demand, which makes it all the more amazing that economics forecasters can't figure it out: Raise the price of being a person who earns X amount of income, and you decrease the demand to be a person who earns X amount of income. Duh.

Anonymous Tom O. December 10, 2012 4:54 PM  

Ca state institutions move with about as much thoughtfulness as a bodily function.

I know that this was meant as a joke, but your gut has its own nervous system, and it's huge. It's often called the second brain for this reason.

Anonymous Edjamacator December 10, 2012 4:58 PM  

Never ceases to amaze me how we have morons, nay, idiots, runnning things.

That's what happens when you let morons, nay, idiots, vote.

Anonymous Edjamacator December 10, 2012 5:00 PM  

Ca state institutions move with about as much thoughtfulness as a bodily function.

I know that this was meant as a joke, but your gut has its own nervous system, and it's huge. It's often called the second brain for this reason.


So how about "CA state institutions end up producing the same results as a specific body function?"

Blogger Pepper December 10, 2012 5:55 PM  

California's government works magic. Our elected officials can fix any problem. Even problems the average dummy doesn't know exist. Here is the proof:
-
My nieces came home one day the first week of (public) high school. The teachers made announcements that the school year would be cut short by one month "if Prop 30 didn't pass" and all of the AP students and all of the IB students would be denied testing. They came home the day after the election - literally the day after - with a new schedule. All furlough days were rescinded and May was miraculously reincorporated into the calendar. Isn't that miraculous? Prop 30 raised so much revenue that even our local community college was able to add 200 new classes to its spring schedule. And, CSU fees won't increase either.

I won't ever doubt another government official again. Ever.

Anonymous Otherwise Silent Observer December 10, 2012 5:57 PM  

California just cannot resist the urge to chase away business owners.

For a laugh, look up "Measure B."

Anonymous Noah B. December 10, 2012 6:14 PM  

Cool how he just openly admits to tax fraud in part 2 by deducting the cost of his time as a charitable contribution. What a ballsy guy that Scalzi is -- I didn't know he had it in him.

Anonymous Brian December 10, 2012 6:27 PM  

As I'm sure it has been pointed out, the whole point of "soaking the rich" is that it won't work. The government can then use the excuse of declining revenues to raise taxes on the rest of us sheeple. Further into slavery we go.

Anonymous Tad December 10, 2012 6:29 PM  

Talk about 7 degrees of separation....from reality.

In the Breitbart quote lovingly provided here, the suggestion is that the reduction in revenue in CA is due to rich people leaving due to the passage of Proposition 30. But of course, no evidence for this is given and no reference to the various reasons given in the announcement are covered.

Vox Day doesn't address this either because it is inconvenient to his point, but rather seems to agree with this wierd assessment.

Proof and evidence and real analysis just can't be bothered with when there is ideology to protect.

Anonymous AnonH December 10, 2012 6:31 PM  

It's not all about the rich moving out of state.

Rich people can easily make their wealth look "less rich".

Aka, if you have the option of paying taxes or pouring a similar amount of money back into your business (which is not taxed, as it is considered an expense), you might as well do the later.

In addition, a lot of pay that rich people take are in the form of stocks, options, or bonuses, and all of those can be deferred to other years.

Thus, even if the rich stayed put, they can always find a way to appear "less rich" when it came to taxes.

Companies have it even easier. They can just change their headquarters to another state. Most larger ones already have offices in other states anyways, so it's easy for them to transfer the actual sales away from California.

Anonymous Hoss December 10, 2012 6:36 PM  

How can you explain Economics and cause and effect relationships to the Left when they can't understand the day-one concept of "incentive." You couldn't dream of them understanding the high-level concepts of opportunity cost and utility.

Anonymous Lysander Spooner December 10, 2012 7:01 PM  

"Despite Tax Increase, California State Revenues in Freefall."

That is right up there with:

"Despite buying "Green Cars", Lefty State Worshipers see Federal Gas Tax Revenues sputter"

Blogger Derrick Bonsell December 10, 2012 7:22 PM  

Tad has lots of information how the folks at Breitbart are so so wrong, but apparently he's too clueless to share.

Anonymous Tad December 10, 2012 7:28 PM  

@Derrick
Tad has lots of information how the folks at Breitbart are so so wrong, but apparently he's too clueless to share

Vox Day provided the Breitbart quote...And you need to do is follow the link, read what Vox Day was referencing, then click the link in the Breitbart story to learn that there is an extraordinary lack of coherence and reasoning in this post as well as Breitbarts. But I warn you.....Be prepared not to be surprised.

Blogger James Dixon December 10, 2012 7:40 PM  

> Tad has lots of information how the folks at Breitbart are so so wrong, but apparently he's too clueless to share.

Tad knows that the folks at Breitbart are wrong, but he just can't quite figure out how to use Google well enough to find the evidence to prove it to us.

As demonstrated by the fact that he couldn't find the Obama quote about cutting the deficit in half even after I gave him the search terms I used to find it.

Funny how that works, isn't it?

Anonymous Tad December 10, 2012 7:54 PM  

@James

Tad knows that the folks at Breitbart are wrong, but he just can't quite figure out how to use Google well enough to find the evidence to prove it to us.

Or you could just follow the directions above.

LOL...irony is funny.

Blogger James Dixon December 10, 2012 8:13 PM  

> Or you could just follow the directions above.

I figure your ability to give directions is about on par with your ability to follow them, Tad.

Anonymous Orion December 10, 2012 8:32 PM  

So the short fall of 806 Billion is attributable to what Tad? Hundreds of thousands of jobs lost in the first month following the election? Are you saying that it drove up unemployment another 10% but no one noticed? Crowing about the supposed hole you found in the logic (which is based on experience from seeing the same idiocy tried elsewhere) falls kind of flat as you dance around the elephant in the room. Posit a reason for the shortfall please. I don't expect you to do so because you have zero cred here.

Anonymous paleopaleo December 10, 2012 9:17 PM  

I'm in Silicon Valley. Many, many rich folks had 'Yes on prop 30' signs in front of their multi-million dollar suburban homes. There are an awfully lot of rich liberals here who never complain about high taxes. Just sayin'.

Anonymous Jack Amok December 10, 2012 9:32 PM  

Of course when it comes to austerity it's the other side that doesn't get it. Cuts in spending lead to greater deficits. But were supposed to be extra careful when it's John Galt's (that's who they like to think of themselves as, anyway) money we're cutting into.

What can we say, idiots all around.


No, Workingman, you're pretty much an Army of One on that one.

Anonymous Tad December 10, 2012 9:51 PM  

@Orion:
Crowing about the supposed hole you found in the logic...

The post here, nor Breitbart's, doesn't really include any logic. So I can't really crow about any "hole" in logic. I was just pointing out the complete and total lack of analysis in both posts. Do you think if the internet is ever filled to capacity they'll point to blog posts like this as the culprit?

Anonymous Johnycomelately December 10, 2012 10:36 PM  

Given all money creation is debt based and taxation services debt, cuts to spending will reduce the money supply (and ability to service debts) while outstanding debts remain the same. So why wouldn't spending cuts increase deficits?

Anonymous zen0 December 10, 2012 10:40 PM  

I was just pointing out the complete and total lack of analysis in both posts

So your analysis is that there is a lack of analysis.

Very deep.

Anonymous Tad December 10, 2012 10:47 PM  

@Zeno

Yeah, I know. But, sometimes the lazy provoke simple responses.

Anonymous zen0 December 10, 2012 10:47 PM  

Johnycomelately December 10, 2012 10:36 PM

Given all money creation is debt based and taxation services debt, cuts to spending will reduce the money supply (and ability to service debts) while outstanding debts remain the same. So why wouldn't spending cuts increase deficits?


Do you ever listen to yourself? Your IF is incoherent, and your THEN is a question. Nobody should have to put up with that.

Anonymous zen0 December 10, 2012 10:48 PM  

Yeah, I know. But, sometimes the lazy provoke simple responses.

That's why I keep it simple for you, weasel boy.

Anonymous A Visitor December 10, 2012 10:50 PM  

"The study’s authors, Stanford's Cristobal Young, an assistant professor of sociology, and Princeton's Charles Varner, a doctoral candidate in sociology..." *part sarcasm* There's your problem! You're using a soc prof and a doctoral candidate in sociology. *part sarcasm off* Sociology, what a joke.

As a poster at the beginning said it best, Laffer Curve!

Anonymous zen0 December 10, 2012 11:05 PM  

Given all money creation is debt based and taxation services debt, cuts to spending will reduce the money supply

I am sorry. I cannot visit your country. I have gone too far to try to come back now.

Anonymous Salt December 10, 2012 11:08 PM  

The last paragraph of the linked article could give one a coronary laughing so hard -

As panic spreads that goosing taxes on the rich may have created enough “tax flight” that the California will actually collect less taxes, there was welcome news that a business had committed to opening in the State. Executives of the 99 Cents Only Stores Inc. proclaimed they would be opening a new location in Beverly Hills on formerly posh Rodeo Drive.

Anonymous Orion December 11, 2012 12:02 AM  

Yes Tad, your response was pretty lazy. As expected.

Anonymous Noah B. December 11, 2012 1:19 AM  

"In the Breitbart quote lovingly provided here, the suggestion is that the reduction in revenue in CA is due to rich people leaving due to the passage of Proposition 30. But of course, no evidence for this is given and no reference to the various reasons given in the announcement are covered."

That's a fair point, but what's your preferred alternative explanation? Unrealistic budget estimates from the bureaucrats? Not enough gay weddings to pump up the economy? Not enough people liking Facebook? I do think the most likely reason for the budget shortfall is that the revenue estimates were overstated to begin with. However, giving the bureaucrats some benefit of the doubt, the next most likely explanation would seem to be reallocation of income to lower tax jurisdictions.

In today's world, not only is reducing tax liability about saving money, it's also a moral imperative. This is something that leftists can't even begin to comprehend: there are millions of us who feel that it is now immoral to give anything to the government, as they will inevitably use our money in corrupt and treacherous ways.

Anonymous Johnycomelately December 11, 2012 1:49 AM  

Rather than using invectives how about showing where the statement is wrong.

Libertarians want to extinguish debt, simply reducing deficit spending doesn't diminish outstanding debt payments. Austerity simply contracts money supply and makes debt repayments more onerous. Either extinguish bad loans or inflate.

Anonymous Krul December 11, 2012 4:05 AM  

In today's world, not only is reducing tax liability about saving money, it's also a moral imperative. This is something that leftists can't even begin to comprehend: there are millions of us who feel that it is now immoral to give anything to the government, as they will inevitably use our money in corrupt and treacherous ways.

Actually, I recall reading something by a liberal who claims that one should cut one's tax payments as much as possible on the grounds that it will be used in defense spending. These guys are leftists who understandably don't want their money spent on bullets and bombs.

It's kind of like how some liberals boycott Chick-fil-A because of their stance on gay marriage.

Blogger LP 999/Eliza December 11, 2012 8:06 AM  

This is awful yet so great! Cali will do fine, just funnel all the pot/drug money for the budgets.

Anonymous Joe Doakes, Saint Paul December 11, 2012 8:46 AM  

Yeah, you would be a Naples guy. Well-to-do Minnesotans go there; upper-middle-class Minnesotans go to Fort Meyers/Cape Coral; proles go to Mesa, Arizona or a mobile home park near Harlingen, Texas.

The rest of us sit in the Frozen Northland and wonder if the city finally will plow the streets today, or not until later in the week.

Anonymous paleopaleo December 11, 2012 12:23 PM  

"The rest of us sit in the Frozen Northland and wonder if the city finally will plow the streets today, or not until later in the week."

Yesterday, Dec. 10th, my wife and I sunbathed in the backyard. Highest taxes in the land! meh

Anonymous rubberducky December 11, 2012 7:39 PM  

Rich Californians don't even have to leave California. They simply buy a cheap property in a nearby distressed real estate market like Las Vegas, change their residency, and viola. Live in LA, pay taxes in Nevada. One guy I know who did this years ago has already saved enough to more than pay for his Vegas home.

Anonymous RC December 11, 2012 8:08 PM  

"Aka, if you have the option of paying taxes or pouring a similar amount of money back into your business (which is not taxed, as it is considered an expense), you might as well do the later." AnonH

AnonH, you don't have a clue what you're talking about. Capital investments must be deducted over time, leaving the business owner out the cash but still owing income taxes on a substantial portion of the money that was invested out of current earnings. Maybe your plan works for very small businesses using the 179 deduction but that's chump change in a business of any size.

Blogger Good Will December 11, 2012 8:55 PM  

My state is run by morons.

Anonymous Annie Biotic December 11, 2012 9:30 PM  

Unfortunately the Lib-afornians will just most the swarm to another area and continue the destruction in their new home. They are simply too blind/willfully ignorant to reach the obvious conclusion.

Beside hose left in CA will be angry at the rich people for leaving and not being bled further.

Ah good times.

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