News-Record.com

You missed the specific tax problem he was focusing on. He was discussing how in CA property taxes don't go up with home values once you are in your home. Therefore you can have next door neighbors with identically valued homes but one has much higher taxes simply because they moved in later. This certainly seems like a problem. California is 15th in total state and local tax burden, so it's above average but not near the top either.

The Tax Foundation chart I linked to ranks California fourth in cost of state and local government per capita, not 15th.

There may be inequity issues related to the property tax structure, but the property tax itself is not a particularly fair way to raise a large share of government revenue.

With California's plunging real estate values, that revenue is negatively volatile. However, there's usually a lag time of several years before the assessed value catches up to the market value. So people could be paying tax rates based on a half-million house (modest by Calif. standards) that may really be worth $150,000.

You also can have people whose incomes have dropped having to pay high real-estate taxes based on unrealistically high property valuations.

Income taxes are generally more progressive and tracked to ability to pay.

However you look at it, in my opinion, Krugman's premise that you can blame California's troubles on low taxes is absurd.

"However you look at it, in my opinion, Krugman's premise that you can blame California's troubles on low taxes is absurd."

That may be true Doug, but blaming California's troubles on high taxes is just as absurd. California has one of the lowest property tax rates in the country, at about $4.77 per $1,000 of property value. Wisconsin and Texas have rates over $18.00 per $1,000.

Now, sales taxes can be a bummer in California, especially depending on where you live. But the bottom line is, property values in California have consistently been much higher than most other places in the U.S. (and the world, for that matter). And even though they're experiencing an equally high foreclosure rate, I have a feeling those properties will be gobbled up early in the (hopefully soon) economic recovery.

As far as the progressiveness of income vs property taxes, there is some merit to that. But they are both way more progressive than sales taxes, no matter what the "Fair Tax" nutcases say.

Property taxes may not be the best method but they are fairer than say sales taxes. Cal is 15th in taxes, even if higher in spending. I don't know enough about their budget to say how that's working.

You do however miss Krugman's thesis. He doesn't blame their troubles on low taxes, but on rigid institutions. The tax issue is a symptom. The fact that California can't raise taxes at times when it may be a good idea is a big problem. If taxes can be lowered easily but only raised through great difficulty, you're going to tilt toward taxes that are too low over time. The 2/3 majority requirement in Cal causes huge problems when quick action is needed, as the filibuster does in the senate.

Doug, you really are missing the point of Krugman's piece. First of all, his premise is not that California's problem is low taxes. A premise is a starting point, and Krugman's premise is that California's budget is in deep trouble. His explanation is that this results from ineffective government, and yes, that includes the inability to raise taxes when needed.

You're right that the news article you cite doesn't show people moving out of California because taxes are too low, but neither does it show that it's because taxes are too high. To be sure, taxes in California are high. But it's the cost of living that's led to the out-migration. And a high cost of living forces taxes upward. It's easy to tax people less in Alabama than in California or New York, because in Alabama the government gets to pay less in wages and purchasing. So it's a little dicey to rank state spending (as you do) or state taxes without accounting for the cost of living.

In any case, I'd say that the thrust of Krugman's piece is less to call for higher taxes than to bemoan the longstanding dysfunction of California's government. However, the latter may necessitate the former.

I think the real reason it's become so difficult to raise taxes in California is that taxes already are high.

Look, a low property tax rate is meaningless if the assessed property value is sky high.

I also cannot account for why California is fourth in government spending but only 15th in taxes, unless state and local governments have engaged in really spectacular borrowing.

Um, yeah, that's kinda the point, Doug. Krugman makes note of California's "irresponsible policies that have doubled the state’s debt burden since Arnold Schwarzenegger became governor."

So Krugman thinks California should raise taxes to keep up with government spending (fourth-highest in the country per capita), while it seems taxpayers would rather reduce spending.

Interestingly, in recent years North Carolina state government was increasing debt without asking voters to approve bonds. That practice contributed at least a little to our current budget troubles.

"Look, a low property tax rate is meaningless if the assessed property value is sky high."

But what you're forgetting is that property values weren't unnaturally inflated by the government, the market did that. And it's been a near-constant for decades, meaning that those who moved to California (or chose to remain there) were fully aware of those sky-high values, and what that represents re cost of living.

At what point would the tax rate become "meaningful"? If someone owning a $500,000 California home paid the same amount (in dollars) as a North Carolinian owning a $100,000 home?

"I also cannot account for why California is fourth in government spending but only 15th in taxes"

That's an apples and oranges question. The tax ranking looks (mostly) at percent comparisons between states, while the government spending ranking looks at total dollars spent per person. Trying to compare by total dollars is both pointless and misleading. Hell, California is like another country. The median household income alone is like14% higher than the the U.S. as a whole. More dollars are earned, collected (in revenue) and spent.

The house of cards fell in.

Government tax and regulation policies can contribute to cost of living. Land-use and building restrictions can drive up housing costs.

Complicated stuff -- much too complex to let Krugman get away with blaming all the state's ills on anti-tax Republicans, as if California is a low-tax state by any measure you want to choose.

Clearly, judging by last week's votes, the vast majority of Californians (not just Republicans) don't think they're paying too little to the government.

Doug, again, California's #4 ranking for spending means less than you think it does, given disparities in cost of living across states. Your repeated mentioning of the ranking doesn't make it more meaningful.

As for spending, I don't know the details of California's budget and neither do you. Krugman claims the state is on the verge of cutting essential services. If they're not essential, then of course they should be cut, and it'd be wrong to raise taxes to pay for them. If those services are essential, however, then cutting them will force taxpayers to incur higher costs anyway, just not in the form of taxes. And because, contrary to the beliefs of many conservatives, governments are the most efficient way to deliver many of these services, the higher costs incurred by households will in the aggregate outweigh the higher taxes needed to enable the state to provide them.

Knowing more of the details might make it clear that California has squandered its resources providing nonessential services and now has this stark and highly unfortunate choice: raise taxes or cut essential services. To interpret Krugman's column about this as advocacy for higher taxes as a panacea that even applies to North Carolina is to miss the point.

I should have said "that might even apply to North Carolina." You didn't say it does apply here; you just asked suggestively whether it would.

"...while it seems taxpayers would rather reduce spending."

That's not true at all. They've been rejecting spending cuts just as surely as they have tax increases. Hence the problem.

Krugman did not blame everything on anti-tax Republicans. As Andrew B. and I pointed out, that's just a small piece of the puzzle.

There have been a lot of polls about what kind of cuts people actually want in government spending, and majorities are against cuts in every major government program, with the exception of the space program, a whopping 1% of the federal budget. The point, which Krugman was getting at, is that people want more spending and lower taxes. That's not going to happen, so government has to suck it up and do something unpopular, which isn't happening in Cal. As someone on the left, Krugman thinks that raising taxes is a better idea than cutting spending. I think he's right, since we are on the lower end of taxes and spending (except for our bloated defense budget) for developed countries we can afford more taxes and spending easier then less, as even Bruce Bartlett, one Reagan's economic advisers who helped create "Reaganomics" points out.

I love the conservative take on markets, exemplified by Doug's response to Steve Harrison. When markets do what we want, we love them and extol the virtues of free enterprise. When they don't do what we want, we blame it on government. Did government policies contribute to rising property values in California? Sure, but mostly those values rose because of simple supply and demand. People kept moving in, and hence prices kept rising.

In fact, government actions over the years may well have kept prices lower, on balance, than they would have been without it. The provision of very cheap water to southern California was quite a subsidy to home and business owners who didn't have to pay the full cost of their water use.

You can talk about essential services, which everyone can agree should not be cut. But what if you pay more for these essentials than what's reasonable?

The city of Vallejo, Calif., is the most famous case in point, having declared bankruptcy last year.

Police services are essential, but is it necessary to pay a police captain $200,000 a year, plus a 29 percent contribution on top of that to the state's retirement system so that he can retire after 30 years at 90 percent of salary? Or to guarantee a city employee health coverage for life after just five years of service?

http://www.washingtonpost.com/wp-dyn/content/article/2008/10/18/AR2008101801964_2.html

But, by all means, let's blame the taxpayers for balking at that.

Sure, that was a bad move on the part of Vallejo, but it doesn't say much about the whole situation. California has more people than all of Canada, so you're going to find poorly run towns.

What Vellejo tells you though, is you need more flexibility in the institutions. When tax revenue was high, they spent a lot of money. Now it's low, they don't have as much. To me it sounds like an argument for good Keynesian counter-cyclical policy. Politically, as again Krugman pointed out, that's hard. In boom times state and local governments feel like they can get away with low taxes and spending a lot of money. In hard times they don't want to adjust. You see very few governments showing restraint and planning when they're flush with cash. The only good example that comes to mind is Norway.

Doug, nice straw-man attempt. If you really think that anyone in this discussion is "blaming taxpayers" for not wanting to overpay for public services, then fine. The rest of us were trying to have a reasonable discussion about the complexities of government, but to you the answer is apparently to reduce it to weird liberal-baiting ("blaming taxpayers") that's more consistent with tonymo's body of work. Maybe public employees are paid too much in California. And maybe that's the market rate out there. Unlike you, I don't have all the answers.

Another fact is that California only gets $0.78 in federal spending per dollar paid in taxes. This ranks 43rd in the country. That would certainly be one reason for the state to spend more than most others, it doesn't have the federal government picking up the slack like an Alaska or West Virginia.

Poor old Tony, a liberal drags him into this, and he not even around.
California spends 30 thousand per household?
Any wonder they are in tough shape?
No were to be found is the argument, illegals costing California 250 billion a year.
Their problem could be solved by off shore drilling! They were offered 50 billion, up front, plus royalties!

Wonder why NC, is busted?
Must be a republicans somewhere at fault.
God knows those liberal jackasses, that run the Raleigh Mafia, could at no way be at fault.
They are great people until the feds put them in jail. Which is not often enough!
Yes, Brod,I am still Doug Johnson, and I am very accessible!

Andrew B., for some reason a comment I added yesterday didn't take. It was in response to the straw man accusation. Here's exactly what Krugman wrote:

"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."

How is it a "straw man" to infer from that statement that he is blaming the taxpayers for California's woes? It's precisely what he said. Or have you deduced some hidden, contrary meaning?

Thanks to Andrew C. for this tip: Krugman plagiarizes my favorite philosopher, Yogi Berra:

http://krugman.blogs.nytimes.com/2009/05/25/remaking-times-square/

Here's a link to the source:

http://hubpages.com/hub/Yogi-Berra-Americas-Funny-Philosopher