Mistaking the symptoms for the disease
Posted by aogSunday, 25 January 2009 at 19:16 TrackBack Ping URL

Via Instapundit, a quote

The ramifications of losing revenue-producing businesses and highly-skilled workers to lower-tax states should by now be apparent even to big-spending governors like Maryland’s Martin O’Malley and California’s Arnold Schwarzenegger - long-term economic decline.
You’d think

It’s irrelevant whether this is apparent to big-spending governors. What matters is whether it is apparent to the voters and clearly, it is not. We can see this in the fact that these losers get re-elected and that so many emigres vote for the same failed policies in their new residences, as if the outcome will be different.

Comments — Formatting by Textile
Bret Sunday, 25 January 2009 at 21:19

This would be the “looting” that you were talking about in a different post.

I actually think that a substantial majority are at least somewhat aware of what’s happening and would like to stop it. However, gerrymandered districts, politicians who lie incessantly, lots of legislation from the bench, lots of money from ultra-liberal hollywood, massive corruption, etc., unfortunately align to thwart the intentions of the majority of the voters.

Harry Eagar Monday, 26 January 2009 at 00:10

Hawaii is a high-tax state, at least according to the low-tax fanatics, yet it never has any difficulty attracting investment, and the new business creation rate is high.

You guys remind me of a story about a guy who was hired to attract new industry to an area. Prospects would come in and be shown the fine school system, the thriving churches, the recreational opportunities, the well0-regarded symphony, “and they would go where the taxes were lowest.”

Probably true for new locations, but the history of United States Steel Corporation shows that it ain’t that easy to relocate established businesses.

Anyhow, if you wanna argue taxes, argue taxes. If you wanna argue quality of life issues, you cannot argue taxes.

Bret Monday, 26 January 2009 at 05:12

It’s funny to me to think that taxes don’t adversely affect quality of life beyond a certain point. And here in California, we’re definitely well beyond that point for anyone who wants more out of their career than being a shoe salesman.

erp Monday, 26 January 2009 at 08:01

The Big O’s plan to allow states to set their own emission standards will also makes states with lower standards more attractive to investors. Prosperous citizens can make their quality of life what they want it to be, not what politicians think it should be.

Annoying Old Guy Monday, 26 January 2009 at 08:58

I will agree partially with Mr. Eagar. Tax rates of themselves are influential but not determinative. I can certainly see the attraction of a high tax state that was otherwise well governed compared to a low tax state that was ill governed. However, low taxes correlate strongly with other issues that are important to business creation and operation such as reasonable regulation and law and so many people use it as a short hand for a variety of things that are not inextricably linked.

Further, if you have other attractions, these can compensate for more onerous business climates. Hawaii and California have that advantage and so can sustain a higher level of intervention. California, though, seems to have found the limits of that.

Hey Skipper Monday, 26 January 2009 at 13:01

Don’t forget the degree of unionization, and the existence (or lack thereof) of right to work laws.

Harry Eagar Monday, 26 January 2009 at 14:50

Hawaii is the most unionized state in the country, with among the highest proportions of government workers, too.

Hawaii has many, many economic problems, mostly connected with its remoteness, but attracting investment has not been one of them.

In the ‘60s, when California was a high-tax state with a big expenditure on education, it set the stage for an economic expansion unprecedented in all history. (Hawaii’s economy goes up and down with California’s, always has.)

The low-tax California of the ‘30s is associated with Steinbeck. That should tell you as much about the linkage between taxes and quality of life as you need to know.

Hey Skipper Monday, 26 January 2009 at 21:51

That should tell you as much about the linkage between taxes and quality of life as you need to know.

Actually, I’d like to hear more about how the money is getting spent. And how requiring a super majority to pass a budget puts far too much power into too few hands.

And how California was busy taxing people out of their homes prior to Prop 13.

Bret Monday, 26 January 2009 at 22:42

Harry Eagar wrote: “That should tell you as much about the linkage between taxes and quality of life as you need to know.

That would tell me the higher the taxes, the higher the quality of life. That would imply 100% taxes would be best of all. Do you really believe that Harry? Do you think that nearly 100% taxes worked out well for the Soviet Union? Or is it possible that it’s a little more complicated than that? Perhaps there’s an optimal tax rate? Not too low, not too high. Not too progressive, not too regressive.

Harry Eagar Tuesday, 27 January 2009 at 11:50

Certainly I believe there is a (moving) optimal tax rate. That is not what Republicans believe. They believe lower taxes are always better, a ridiculous proposition.

Listen to Boehner this week. The man is demented.

California was not taxing people out of their homes prior to Prop. 13. There were other states with property taxes as high and higher that never passed a Prop. 13, and people are still living in their houses there.

In California, in some municipalities, property values were rising fast and so were taxes because adjustments were not made, for a variety of reasons. Aside from being unfair, Prop. 13 was a steam hammer used to crack a walnut.

What kept people out of homes in California were market prices that went up, eg. in San Jose, by 2000%. The values of the homes, of course, did not change.

It wasn’t taxes that were out of whack in California.

Hey Skipper Tuesday, 27 January 2009 at 13:28

California was not taxing people out of their homes prior to Prop. 13.

The heck they weren’t.

I was living there at the time. Property values took off — assessments doubled in the space of a few years. Property taxes were based upon assessed value. Now, the politicians could have reduced the rate, because government provided services are independent of property values. (That is, if property values double year-on-year, that is no reason for the cost of government to double.)

Could have. Didn’t. The fools just went ahead and spent the increased revenue like, well, like a bunch of drunken monkey politicians fighting over a football. People on fixed incomes were getting taxed out of their homes; everyone had less of their own money as a result.

They believe lower taxes are always better, a ridiculous proposition.

Sounds like a straw man to me. As for Boehner, his dementia (like Reid’s and Pelosi’s on the other side) should not be used to discredit serious Republican arguments.

cjm Tuesday, 27 January 2009 at 13:28

you left out the part about people with fixed incomes who were in fact being forced out of their homes due to skyrocketing taxes. given how badly the state has mis-handled the money it has managed to extract from the residents of california, i’d say it’s a good thing a cap was placed on the property tax rates.

Harry Eagar Tuesday, 27 January 2009 at 18:58

Shoulda voted the rascals out.

Prop. 13, in the long run, didn’t keep people in their homes, did it? Who’s got the foreclosure epidemic?

Hey Skipper Tuesday, 27 January 2009 at 20:41

cjm:

I notice you and I posted at about the same minute.

BTW — I’ll be in CA in mid-March probably between the 13th and 16th.

++++

Harry:

Shoulda voted the rascals out.

What, and vote in more politicians fighting over taxpayer’s (note the possessive) money like a monkeys fighting over a football?

Prop. 13, in the long run, didn’t keep people in their homes, did it? Who’s got the foreclosure epidemic?

I know I am going out on a limb here, but I am going to suggest that events separated by 35 years might, just might, have different causes.

cjm Tuesday, 27 January 2009 at 20:54

the people losing their houses now, aren’t losing them because of tax problems. harry, you are pathologically adverse to simple facts; in short, you are perverse.

Harry Eagar Wednesday, 28 January 2009 at 15:35

’ As for Boehner, his dementia (like Reid’s and Pelosi’s on the other side) should not be used to discredit serious Republican arguments.’

What serious Republican arguments? He’s one of the highest leaders of his party, he was selected to give the national response to Obama’s plan, and all he talked about was lowering taxes.

Riddle me this: You need to buy a new truck for your business, but you cannot raise the sand. Which tax, if lowered, will get you the loan that you have up to now been turned down for?

For the record, I am dubious that Obama’s plan will do much good, and I don’t think anybody has any better ideas. The Republican economic program of deregulation, overspending and low taxation has wrecked the economy. It may be like boiling an egg. You cannot unboil ‘em.

Harry Eagar Wednesday, 28 January 2009 at 15:49

And before California history goes completely down the memory hole, let’s recall that Prop. 13 was not a response to rapidly increasing housing values.

It was the bugbear of a tax-hating kook who had been flogging it for years.

California had a real issue to deal with back then, and instead of dealing with it in a sensible way, it panicked and ran off with a snake oil salesman. Somewhat later, Cali woke up, groggy, in a strange room in an unknown city, her purse and innocence both missing.

What do you expect from a state whose voters elected Nixon, Reagan, Brown and Schwartzenegger?

erp Wednesday, 28 January 2009 at 15:58

“The Republican economic program of deregulation, overspending and low taxation …” did not wreck the economy. We’ve gone over this ad nauseum, repeating it, like wishing, doesn’t make it so.

Harry Eagar Wednesday, 28 January 2009 at 20:18

So what did wreck it? I recommend you read Bloomberg today, especially the opinion columns, before you say, Community Reinvestment Act.

Brad S Wednesday, 28 January 2009 at 21:16

“Hawaii has many, many economic problems, mostly connected with its remoteness, but attracting investment has not been one of them.”

And on the opposite end of the high tax/low tax scale resides my native South Dakota. It is often ranked in the lowest-3 in terms of per-capita tax burden (usually ranked lowest), has a famously conservative culture, a parsimonious state government (the state is constitutionally prohibited from issuing General Obligation bonds), and even a teacher’s union that is continually overruled on its requests. That hasn’t stopped the state from “suffering” the continual exodus of its young people toward greener (high-tax, in the case of the Twin Cities) pastures that has been a hallmark of the state’s culture since the Great Depression.

About the only real investment that is made in SoDak is by retirees looking for dirt cheap land to put up a triple-wide trailer.

Bret Thursday, 29 January 2009 at 11:27

Harry Eagar wrote: “They believe lower taxes are always better, a ridiculous proposition.

That is a ridiculous statement. Maybe some republicans believe that, and many more probably believe that taxes lower than the current rates would be better, but I doubt very many believe that zero taxes across the board would make sense.

Annoying Old Guy Thursday, 29 January 2009 at 17:04

I thought “they” believed in the Laffer Curve which explicits refutes that claim that “lower taxes are always better”.

As for what did cause this crisis, it was basically government intervention in the market place, primarily in home mortgages. Massive overspending and regulation contributed as well, plus selective enforcement of those regulations. One must not discount the general zeitgeist of “I’m not out of money as long as my credit card accepts charges” which has become so prevalent, as exemplified here and in the current “stimulus” legislation.

Harry Eagar Thursday, 29 January 2009 at 23:08

The Laffer curve was just for the peanut gallery. The real belief was that no taxes would result in no government — the ideal situation.

Not that ‘they’ wanted to push it quite to 0. They were ready to maintain an army and a customs service.

I have been reading Republican critiques — if we can be so generous for virtually contentless statements — of the Obama package, and so far I have not seen one, not even one, proposal for anything except lower taxes.

Annoying Old Guy Friday, 30 January 2009 at 08:55

Ah, argument by telepathy. Excellent choice of technique.

I think that proposing only lower taxes is sufficient, although regulation reform and massive spending cuts would be good additions. I have been watching what is in the stimulus bill and so far I have not seen one, not even one, proposal for anything other than handing out borrowed money to political friends. Give me tax cuts instead any day.

Harry Eagar Friday, 30 January 2009 at 15:52

The infrastructure spending is long overdue and should be done, although I see no reason to think it will do a great deal to revive the economy. Cutting taxes will do nothing at all.

I have nothing better to propose. There are mistakes that cannot be retrieved, and the Reaganomics policy of driving the income of the mass of Americans down to world levels was bound to ruin an economy based on consumer spending. Even crazy old Henry Ford understood that.

We are not through crashing, and reversing deflation is a problem that still may have to be faced. The only idea anybody ever had to deal with that was the Tugwell-Moley prescription, and the Republicans sabotaged that one. They are busy sabotaging this one, and seem gleeful at the thought that six months from now things will be worse. They may well be, although any Republican with a sense of shame would shut up right now and hope for the best.

Cromwell’s adjuration rings true again. “I beseech, you, in the bowels of Christ, think you may be mistaken.”

Annoying Old Guy Friday, 30 January 2009 at 17:18

So, the spending won’t do any good at helping the economy therefore the Republicans are wrong to oppose it?

If that’s the sort of logic you follow, I am not surprised that you think lowering taxes and regulation are ineffective. After all, that’s what Republicans do and therefore ineffective at best and perniciously evil at worst.

erp Friday, 30 January 2009 at 20:39

ACORN is getting 1.1 B* — that’s as good reasons as any to vote nay. If the Republicans stick together in the senate, I may send them a check. The first in many, many years.

*B = 1,000 million bucks.>/i>

erp Friday, 30 January 2009 at 20:40

Sorry for the typo. This subject is way too depressing to type carefully.

HarryEagar Friday, 30 January 2009 at 23:05

The Republicans should just shut up. They’ve done enough damage for one century.

I do think you are in dissociative state if you will just listen to yourself. Until very recently, we were assured that god was in his heaven and all was right on Wall Street, that market forces were doin’ their thing, we were walking through broad sunlit uplands.

When I say very recently, I mean March 2008, not even one year ago. Since then world market value has sloughed off $25 TRILLION. It was largely imaginary, but there you are. American banks are so far underwater ($3.6 TRILLION, if you believe Roubini) that for them to have got that way via mortgages, you would have to believe that not one honest mortgage was written for the past 10 years.

You still haven’t even tried to answer my question: which tax, if lowered or extinguished, is gonna get me the loan for that truck.

Annoying Old Guy Saturday, 31 January 2009 at 09:57

The Republicans should just shut up. They’ve done enough damage for one century.

At least we’re clear that you find the GOP illegitimate a priori and can put an appropriate value on your criticism thereof.

which tax, if lowered or extinguished, is gonna get me the loan for that truck

Corporate income tax. If you had the money, you wouldn’t need the loan. As it turns out, my brother is running a business right now, and looking for a loan right now (not for a truck, but for a new building /land). It’s all about expected income, and a lower corporate tax would directly impact that, which in turn would (1) reduce the amount he needs to borrow and (2) increase the probability of getting the loan.

Also, your memory is once again solarizing reality, turning anything that wasn’t predicting the apacolypse into “walking through broad sunlit uplands”. I remember years of concern about housing prices and the economic disaster potential of the inevitable collapse.

Harry Eagar Saturday, 31 January 2009 at 13:03

I don’t remember any of that, not from the free-market maniacs. All I remember is the happy talk, the fabulous expansion created by unleashing the market.

So, is your brother getting a loan? It isn’t all about expected income, because even credit-worthy applicants are getting turned away. Heck, just yesterday I had a story about a quarter-billion-dollar project that’s been scrapped.

It’s all about business confidence and there’s not much of that left.

Annoying Old Guy Saturday, 31 January 2009 at 17:17

He’s shopping around and confident that if the business numbers work, he can get the loan.

And just because a project costs $250M doesn’t mean it involves credit worthy applicants.

Harry Eagar Saturday, 31 January 2009 at 23:30

He’s likely to get an unpleasant surprise, then.

If you are going to argue for lower taxes, the corporate income tax is not a felicitous choice. Many, many corporations are looking at $0.00 corporate income tax bills this years, and some, like GM, have so much carryforward that they will never pay corporate tax again, even if they do survive.

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