One other consequence of this is that a cleaning lady in San Francisco may make $70K per year and be near the poverty line, yet be in the same tax bracket as a professional living in Nebraska who is living well above the poverty line.
It would be interesting to see an illustration of how regressive Federal tax brackets are when you consider the state-by-state cost of living differences. Some of the most populous states have the highest cost of living.
Most likely the cleaning lady has economic income a lot higher than that, it's just that much of the income is non-taxable and not tracked by anything other than consumption statistics (sometimes).
For example, to live in SF on $37k, she's probably in some rent controlled flat or public housing. So she may be paying $800/month for a $3000 flat which means she's getting subsidies worth 12 x $2200 = $26,400. Accounting for this her income is $63,190, and this is at a much lower tax bracket than a person earning $63,190 in market income.
She might also just be, you know, poor. She might live far away and spend a lot of time on a bus, sharing a studio apt with other family members that also work low wage jobs.
I think this is the most reasonable conclusion. In CA this is a very common pattern. Growing up I had more than a few friends with very large immediate families sharing very tiny apartments.
That's also possible, but in that case she isn't paying an SF cost of living.
Also, either $37k or $63k isn't poor. Lets remember that French GDP/capita is only $42k/year; is half of France and more than half of Spain (plus nearly all of Bulgaria) "poor"?
Of course this is an average number, not a median, but at least comparing it to _average_ incomes might not be completely unreasonable.
I haven't looked at the numbers for Bulgaria, but it's entirely possible that by current US standards nearly all of it _is_ poor, in terms of material standard of living...
(For comparison, the US labor force is about 160 million; it went up by 5 million in the last two years; see http://www.dlt.ri.gov/lmi/laus/us/usadj.htm . The unemployment rate is about 5%. US GDP is about $18 trillion this year. So we get GDP/employee of 18e9/(160e6 * 0.95) = $118k/year. Not that much more than France, unsurprisingly, and we haven't even gotten into the differences in hours worked.)
2) As noted above, the concept of "poor" is a relative concept, not an absolute one. Someone living today in the US who enjoys the median 1950 US standard of living because that's all they can afford would be considered poor. Someone who enjoys that standard of living in Somalia... not clear.
3) In addition to all of the above, looking at just income to determine "poor" or not is quite weird. A $30k/year salary for an adult who supports a partner and 2 children is not at all the same thing as a $30k/year salary for a single adult.
My first thought was "why doesn't the cleaning lady move?" And that lead to a thought experiment: what if everyone moved to Nebraska for a more comfortable life. Prices would go up. The people would experience a Nebraska winter and be willing to have less 'real' money and move back to California. And that's right where we are in the real world. You can't balance just part of life (taxes) when there are other imbalances (benefits of place) that can't be balanced. If costs/life style were comparable in cost between CA and NE, there would be a massive influx into CA. Economics is awesome - it explains so much!
Almost nothing about the climate (I like winter) or culture appeals to me, yet I'm pulled towards there to succeed in a tech career. This is simply network effects in action, except that unfortunately this network has been built in one of the locales in the US with some of the most aggressively anti-growth policies possible. Things would be much better if tech was centered around somewhere like Chicago or even New York.
Yes it is, but the large bay area groupthink collective will try to explain that it's really not possible to shine as a developer anywhere else. It's easier to overpay by 2x in a rat-race society while you destroy the city you're all overcrowding when you can claim it isn't your fault, that you are obliged by professional etiquette to live there.
At least it keeps the area where I live free of that sort of toxic culture!
It's certainly possible, after all I've managed to do it so far. It's not optimal though, as you are fighting an uphill battle in certain respects.
In particular, outside of SV it's substantially harder to:
1) Break into the top ranks of tech compensation. The companies and roles paying >200k/yr are heavily concentrated in SV.
2) Found a successful startup. The concentration of capital and connections in SV remains unparalleled elsewhere.
I don't think it's really that different from finance. You can have find finance jobs throughout the country and you can even build a successful career in most places. But if you want to succeed at the highest level, you'd be well-advised to move to NYC.
> 1) Break into the top ranks of tech compensation. The companies and roles paying >200k/yr are heavily concentrated in SV.
> 2) Found a successful startup. The concentration of capital and connections in SV remains unparalleled elsewhere.
From my perspective, your definition of a "successful software career" is rather narrow. Where else can you make 6-figures your whole life and be considered a failure?
Success is continuous, not binary. Clearly Jerry Yang is very successful, but he's not as successful as Mark Zuckerberg.
Like I said, it's perfectly possible to have a nominally successful career in software elsewhere. It's just that if you want to reach even higher levels of success in software, you're encouraged to move to SV.
It's "very possible" to have a "successful career" in lots of places, doing lots of sub-optimal things. But if your goal is to optimize your tech career, that narrows down your options significantly.
That really depends on what you define as "optimal". Having worked at the Google's, FB, and Apple's of the world is something to put on a resume. 9/10 the job isn't fulfilling.
I'm not telling anyone what their life goals should be, or what they should optimize for. Just pointing out that if someone highly prioritizes career success, they would find themselves having to move to SF (or one of the few other hubs). I don't think it's anyone's role to lecture others on the internet about what their life goals should or should not be.
Define "career success." I live 3+ hours out of LA. I work with scaling distributed back end systems. I make well into 6 figures (admittedly with a 1 in front). Bay area companies try to recruit me often enough but tend to not be able to afford me (and I really like where I work). I'm not trying to toot my own horn, and I may be in a minority; however I don't find myself "having" to move to a tech hub, and I feel successful thus far in my career. Tangentially, I avoid SF like prices: my mortgage in my mountain community is about $800/mo. Sorry to be pedantic, but the correction I'd make to your statement: one can likely incease their chances for career progression (or starting their career) by moving to a tech hub.
> "one can likely incease their chances for career progression (or starting their career) by moving to a tech hub."
That's neither pedantic, nor a correction. That's exactly what I've been saying all along. Career success isn't a 0/1 boolean, and no matter how successful someone currently is, there's always the potential for even greater career success. Optimizing for career success includes optimizing your chances for career progression.
If your goal is to live in an area where there is actually a shortage of talent and it is really easy to get a new job if you don't like your current one, there are only a handful of options outside of California.
I live in an area where most of the cities are smaller and less crowded than a SF/NYC/Chicago suburb. Tech jobs abound and there is truly a talent shortage. By every quantifiable measure your cost of living here is lower, your paycheck goes farther, and at a nominal level the paycheck is very close to anything you would get in SF for a comparable position.
I live in Dallas, and from what I can tell any shortage here is self-imposed. We just laid off four good developers. Took them three months to find new work. I keep running into walls with recruiters and HR departments who won't even interview me because I don't have their specific boxes checked off. Beggars can't be choosers, so my conclusion is they are not really beggars.
Thought experiment: Would developer salaries in general be as high as they are today if we hadn't happened to choose an area with such high cost of living area as our nexus, with the consequential requirement to pay so much to attract talent?
That is, would a guy like me (or you) be able to pull in multi-six-figures a year to telecommute to the Bay Area from out in the sticks if there weren't so many poor souls physically there keeping rates up for the rest of us?
What would things look like if the tech hub were in Ft. Worth TX instead (or Scott's Bluff, Nebraska), with hundreds of miles of flat empty cheap land in all directions to keep housing prices down near zero.
The cost of living follows salaries of the tech sector, not the other way around.
Even the tech hub was not on a peninsula, you'd still have an expensive center and poor people would have to suffer a long commute like East Bay people do in the Bay Area.
Just look at London or Paris: it's not cheap despite not having the same geographical problem. It's not as expensive as the Bay Area because there are many people with various jobs, not just highly paid tech workers.
It's a combination of demand and city-policies. San Francisco has a lower population density than queens, but the same housing price levels as Manhattan. If the city got its act together and built up a housing density that's on par with Manhattan, cost of living would fall dramatically.
Good governance matters. It makes a huge difference in cost-of-living. The way SF is run, it's almost as though people want the cost-of-living to be as high as possible.
> The way SF is run, it's almost as though people want the cost-of-living to be as high as possible.
Surely you're joking? Of course that's what they want. SF people, home owners, are voting on SF policy. Do you want to lose half the value of your house?
> SF people, home owners, are voting on SF policy. Do you want to lose half the value of your house?
Its more complex than that, as SF people voting on policy also include renters, and even if rent control insulates them from directly paying for price increases, market price declines save them money (and both increases and declines affect local costs of other goods, so they affect CoL even if they don't directly affect existing renters rent payments.) But, renters are largely people who have decided the trade-off of quality for cost at the current price does make sense, so they are less likely than outsiders who might want to move to SF if it was more affordable to make trade-offs that impact the qualities that they prefer in SF for lower prices, even if it would reduce their cost of living.
The long commute for those who can't afford the center is not actually a law of nature. Better infrastructure gives better results.
For example, you can get to midtown manhattan in half an hour on NJTransit from East Orange, NJ, a very cheap place to live. The NYC metro area is chock full of affordable neighborhoods where the tradeoff is merely having a commute, not a LOOONG commute.
Ideally, you have your infrastructure scale as the city grows, to maintain constant commute times for workers even as they move further out.
Artists and designers also live in the bay area and work for bay area tech companies, but they don't get paid the same salaries developers do. The video game industry is also in the bay area, but they don't need to pay as much to attract talent. Their salaries are less than web devs, but not that much less.
Salaries are a function of supply and demand. In that way, it wouldn't matter if the companies are in SV or in Kansas: they're still shooting themselves in the foot. Every company wants to hire the best, the top 10% of developers, when in actuality they probably only need to avoid the bottom 25% (assuming tech talent follows a bell curve). By setting up the ridiculous filters to hiring, they're artificially limiting the supply of developers on the market by 65%. In doing so, they keep the salaries of developers artificially high.
As a west coaster, I can't stand Chicago or New York. The weather sucks, the topology is boring, the people are either boring Midwesterners, or crass north easterners. I'm happy the west coast gets more play, though I would probably not want to live in SF.
> As a west coaster, I can't stand Chicago or New York. The weather sucks, the topology is boring, the people are either boring Midwesterners, or crass north easterners. I'm happy the west coast gets more play, though I would probably not want to live in SF.
While the stereotypes exist for a reason (and anybody who's lived in NYC or Chi-town testify to these particular ones), have to disagree with you on the being able to put up with "those" people. It's the west coast that is the outlier here as a (stereotypical) bunch of pansies who can't (again stereotypically) deal with rawness of reality.
I'm fortunate, or not, for having lived in western (Seattle) and eastern Washington, Bay Area, Portland, Toledo, New York City (well, Westchester County), Vicksburg MS, Boca Raton, Salt Lake City, Austin (some for a few months, many for a few or more years).
There is nothing wrong with the other areas of the US, and Americans are mostly the same, but I find the laid back style of the left west coast just to be the most suited. Well, Californians can take that a bit too far...
That's "topography." The topology at Chicago, Harvard, MIT, and Princeton is clearly less boring than the topology at West Coast schools, Stanford included.
I've lived in both the Bay area and NYC. I can tell you the culture in NYC is very strong and hard to match. My spouse and I often look back fondly at the fun times we had in NYC. Chicago also has a very fun vibe depending on where you are. The Bay area is weak in that department IMHO.
I lived in Beijing for the last 9 years and had lots of fun, but am looking forward to going back to the west coast in a couple of weeks to live a comfortable productive family life. I guess it depends on what you are looking for.
Good for you. I don't dispute that many people really like the culture and weather of California.
My problem is that a lot of people seem to be pretending that the only reason there's so much demand for housing in California is due to the favorable weather/people, when in reality a huge proportion of the people there wouldn't be there if it weren't economically beneficial.
Because she can make $70k as a cleaning lady by living in a city where a lot of households make $500k+ and can afford to pay more than the average for cleaning services. I suspect cleaning ladies in Nebraska don't make $70k...
> Because she can make $70k as a cleaning lady by living in a city where a lot of households make $500k+ and can afford to pay more than the average for cleaning services. I suspect cleaning ladies in Nebraska don't make $70k...
I suspect the vast majority of cleaning ladies in SF don't make $70k either.
But isn't that the whole point of this discussion? That the money made in Nebraska, while less in absolute terms, still buys more due to lower cost of living and/or taxes?
If your only higher costs are housing and maybe a bit more expensive food, you'll still come out way ahead since everything else stays the same in price. You might have to live in a closest, but you'll have way more money for retirement, or to send back home (as cleaning ladies are often immigrants).
You mean citations? When I worked in the states, many of the cleaning staff were immigrants. It's not a bad job for them, the pay is good (relatively speaking, vs. training needed), it doesn't require much language skills. Of course, it really depends where you are, but we were talking about SF, I think.
Just idle curiosity, but why did you choose Nebraska? The top five states in which a hundred goes farthest, are, according to the article, Mississippi, Arkansas, Alabama, South Dakota, and West Virginia. It doesn't really change your point (I don't suppose Californians would enjoy our summers any more than they would enjoy Nebraskan winters), but I wondered.
The absence of a table makes it hard to tell what the absolute order is, but Missouri, Iowa, Oklahoma, South Carolina, and Ohio also come out ahead of Nebraska, putting it at least at 11th.
Actually the cleaning lady is comparing California with Central America-- international immigration is why CA's population continues to grow. U.S. citizens have been fleeing California by the millions for the last two decades. https://www.manhattan-institute.org/html/great-california-ex...
In America your job is tied to your medical benefits. Lots of people would like to just move but can't because their job provides medical insurance. And they might have a preexisting condition preventing them from getting medical insurance elsewhere easily.
So this economics that balances out the part of life you mention, is reduced since people are less mobile due to medical insurance.
If medical insurance was provided by the state (like in most other countries), you would see more people moving where it would be more efficient for them (and the economy) to work.
I'm not so familiar with the US healthcare system, but I was under the impression that the ACA meant that pre-existing conditions were much less of an issue?
In any case, I'm not sure the conclusion follows. We see exactly the same pattern in the UK, where healthcare is almost entirely public. What the calculation fails to take into account, IMO, are other factors – someone who has lived in a location for a long time may be skeptical of moving, simply because they have roots (homes, friends, family, social groups etc.) and disrupting that is hard.
Yes disrupting social inertia is hard. But it's compounded in the states with medical insurance tied to their job. It's yet one more thing preventing people from moving, even if they want to.
Not only that, if you move in the states you will want a job already lined up. If you build up a bunch of savings and then move to find a new job you won't be covered and so it's more of a risk.
I can tell you that medical insurance is about #5 on my list of reasons I am not moving without a job lined up. I think you are overstating the importance of medical coverage and understating the other factors that come with an out-of-area move.
Yeah, it's now possible to get insurance for individuals with preexisting conditions.
It's pretty expensive though, I'm not sure a lot of people would leave a job that included healthcare as a benefit to move to another area and look for a job.
There's also probably a lot fewer jobs for cleaning ladies (or any job) in Nebraska. Unless you're independently wealthy you don't get to choose a place; you just get to choose a (place, job) tuple.
Yes, this is still an example of economics explaining stuff.
Income can also be chosen to a large extent. You can work more, work less, do a harder job, do an easier job. Basing taxes on income suffers from the problem you describe.
A flat annual fee, as suggested by Proudhon, would be much more fair. I do not mean a "flat tax", which actually scales linearly with income, but a flat dollar amount.
The federal government could replace all of its taxes, all of them (income, corporate, capital gain, etc) with a simple $500 a month per person payment.
This would also make a lot of people reconsider their voting priorities. Let's see how likely they'd be to support trillion dollar wars.
For me it is easy to afford 500 euro a month. my taxes would go up slightly (I'm not high income, i pay 450 euro a month now and have some rebates) but i'd be ok. for my roommate, who is usually a student but now just gives a few tennis lessons and works in an ice cream store, it would mean becoming homeless. because she could no longer afford the rent i charge (which is 300 euro). And it's hard to keep a job when you're homeless. She'd be reliant on her parents or else she'd need to sell her body. I don't think it's fair to do that to a girl of 19. Although she is talented enough there is no way she will make as much as I do in a reasonable timeframe.
maybe i dropped a zero or something, but i think you're needing about double that to cover the $4T. $4T/350M workers /12 months =~ $1000, per person. if you just count 160M workers, it's more like $2000
$500 per month sounds like the ultimate wage slavery. I prefer being exceptionally underemployed. Reducing almost all my expenses. Forced income tax seems immoral.
This is not a new thing. It's called a head tax and it was quite a normal way to be taxed prior to the industrial revolution (which enabled the government to take the payment directly out of the paycheck before it ever reached the recipient).
Also, things like property tax have the same effect -- can't get away from taxes even if you have no other expenses. Property tax can be jettisoned by selling your property, but then where are you going to live? You'd need to generate taxable income to rent someone else's property.
With a head tax, having no income and just crashing on a friend's couch (i.e. being a dependent) would put you "in the red", no? As would the more common cases of being a dependent because you're too young, or too old, or too stay-at-home-parenting to work.
Or is a head tax meant to apply to "households" (in the census sense) rather than to individuals? Or, alternately, is the breadwinner of a household meant to pay the head-tax for all their dependents?
It requires no more bookkeeping or accounting beyond that which is already required by the census.
It would apportion federal taxes to the states in proportion to their populations, as required in the Constitution prior to the income tax amendment. This could potentially reduce the number of taxing authorities any given individual would be exposed to. Your state might pay the federal capitation, but might raise the funds for it via other methods of taxation rather than its own head tax.
It reinforces the idea of equality before the law.
It encourages pursuit of additional income. You are more likely to do additional work for an extra $500 if you then get to spend all $500 of it, rather than just 75% of that.
The government is encouraged to promote increased birth rates and immigration as a means of increasing its revenue.
But the number one argument both for and against against head taxes, depending on who you are, is that it creates an inherent de facto limit on government spending, based on what the lower class can afford to pay. If there are people who simply cannot pay more than $500 a month, you cannot raise more than $500 x population via the capitation. So you can't spend more than that without resorting to other sources of revenue.
A considered response that I will have to take point by point.
* It requires no more bookkeeping or accounting beyond that which is already required by the census.
That bookkeeping while annoying is extremely profitable, every additional dollar added to the IRS budget results in 4 dollars of revenue[0]. Simply put from a governmental perspective it's highly cost effective. While a head tax might be cheaper directly to implement, it has other costs that aren't considered that I will get into below.
* It would apportion federal taxes to the states in proportion to their populations, as required in the Constitution prior to the income tax amendment. This could potentially reduce the number of taxing authorities any given individual would be exposed to. Your state might pay the federal capitation, but might raise the funds for it via other methods of taxation rather than its own head tax.
I concede this point, but this more of a solution looking for a problem than anything. Moving money into different accounts is pretty much a solved problem.
* It reinforces the idea of equality before the law.
A flat percentage after a single deduction related to the cost of living would be equality (a man should not be taxed before he feeds himself in my opinion), the myth that the CEO and board actually created the billions of dollars that his corporation captured (because he worked a few hundred times harder then the guy pulling 12 hour shifts on the factory floor) is old and tired. It was his employees that did so as well, and taxing them at a far greater percentage (79.58% on minimum wage to be exact) than him is not equality. It's theft.
* It encourages pursuit of additional income. You are more likely to do additional work for an extra $500 if you then get to spend all $500 of it, rather than just 75% of that.
Firstly, Where is this a problem? On the one side of the spectrum we have the poor working 3 jobs to pay rent (whom you propose to more than quadruple the tax burden on, thus all but stopping the velocity of capitol and probably destroying the economy[1]) whom need to earn as much as they possibly can just to get by. On the other side the wealthy/upper middle class is generally obsessed with status symbols. That won't change if you tax them at 4,40, or 91% (see 1953 - 1961). They will still want to buy the newest Tesla, send their kids to whatever expensive school and go on exotic vacations as long as their neighbors do. Hell, in bad times many of them finance it up until bankruptcy to keep up appearances (see 2008 - 2010). The data is clear, they will continue to work and spend as they always have.
Secondly, Not once has someone gone, "Yeah I'd take that 10 million, but I'd have to pay 2.5 in taxes, so burdensome, forget it" and even if they did, someone else will step up and fill the void if a market exists. On the other hand if you tax a minimum wage employee at 80% why the hell would you even bother going to work? You are homeless and hungry either way, what will the few dollars you earn for 8 hours of work get you? Might as well sit in the park and panhandle, it's more profitable.
* The government is encouraged to promote increased birth rates and immigration as a means of increasing its revenue.
They aren't now? I see plenty of tax benefits for having children. More people, more consumption, more incomes, more revenue. The only difference here is the government has no incentive to raise the average rate of pay of Americans. Why educate them so they can get better jobs? Why worry about the state of the economy? They pay $1000/month anyway. A percentage doesn't have this problem.
* But the number one argument both for and against against head taxes, depending on who you are, is that it creates an inherent de facto limit on government spending, based on what the lower class can afford to pay. If there are people who simply cannot pay more than $500 a month, you cannot raise more than $500 x population via the capitation. So you can't spend more than that without resorting to other sources of revenue.
Firstly, why can't the government just take out debt like it does currently. This plan does nothing to prevent that and a proposal to do so can be applied to any tax plan (IE, constitutionally prohibit the government from taking new debt).
Secondly, I'd argue that the working poor can't afford the current levels of taxation. Raising it to above 60% for the working poor and below 1% for the wealthy is not a solution to that problem. In fact, the entire reason for the 2nd amendment is to prevent something like that from happening. If anyone seriously purposed this change there would be riots in the streets. If it passed, many would die before it was repealed or the government overthrown entirely. This is the nation that started a war with the greatest military power on earth at the time over a 3% tax on a single non-essential good, you'd be wise to not forget that. The rural poor certainly haven't.
So in conclusion, the people advocating this wish to lower their taxes at the expense of others and use justifications that make little sense in order to attempt to do so.
I would assume (and always question assumptions) that tax revenues would be nonzero if IRS funding were zero. Some people will just voluntarily pay their taxes out of a sense of civic duty. Then, for the first dollar spent on the IRS, that will return some multiple of that dollar. I assume there are diminishing returns:
That means that Congress decided to just stop funding the IRS at some point. In a sane business, this might be because all other projects return more than $4 for each additional dollar spent, and the revenues cannot immediately be used for additional spending. If there were no such restriction, all projects could be brainlessly funded to the point where only $0.99 in revenue is realized from an additional $1 in budget.
The head tax simply has a different function: Revenue = integral( g(IRS_budget), 0, IRS_budget ) + D
We don't know what the shape of that function might be, only that there is a hard upper limit on revenue equal to the capitation * population.
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You're confusing equality with fairness. A capitation would be equal. A fixed percentage after deduction would be fairer. I might argue that a different tax equation would be even fairer than that. But government is not, and never will be, fair. The minimum amount of fairness we should tolerate is equality.
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You are missing the point about incentives for extra work. An extra $10M is so far beyond the scenario I had in mind that you might as well be talking about trade routes in the Tau Ceti system.
In the real world, at the very bottom, payroll taxes are very significant, as they are a regressive tax. Means testing on subsidy programs also play a role. So some people face a choice such that if they work harder, they actually get less disposable income. If you get $200 (gross) a week from working 20-30 hours part time at the supermarket, and you get WIC and/or SNAP benefits, due to your poverty, you are still paying $12.40 plus unemployment tax, even with no income tax withholding, for $187.60 net. If you become full time, working 40 h/wk at $7.35/h, you lose your SNAP benefit. And you are now paying $18.20 in payroll taxes per week. You now have $275.45/wk to spend. If your SNAP benefit was more than $87.85, you are doing more work for less disposable income. The average SNAP benefit is $127/person.
Accounting wise, the loss of subsidy is roughly equivalent to an additional tax on the extra earned income. If the only tax/subsidy were a capitation, no one would ever refuse promotion from part time to full time and a raise from $7.25/hr to $7.35/hr out of fear that they would end up with less to spend. (Again, not necessarily a fair way to encourage additional work.)
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The government's ability to borrow and run the money-printing presses is orthogonal to discussion on forms of taxation.
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I am not advocating a head tax. I am simply stating possible arguments in its favor, playing the devil's advocate. It is pretty much the exact opposite of guaranteed basic income, which I think would be more favorable. But a capitation is not an unmitigated negative. It does have its good points, which have to be compared with other systems. You said you couldn't think of any positives about it, so I gave you some to consider. I am not extremely motivated to defend any of those points, but I hope you will concede that they do exist.
Property taxes might be just as difficult an imposition to avoid, but generally scale with the size of the property and don't apply to those who are living of the goodwill of others; they're also seldom conceived as income tax replacement schemes starting at $6000 a year.
Even back in eras when slavery and serfdom weren't widely seen as immoral, attempts at universal head taxes tended to cause riots.
> One other consequence of this is that a cleaning lady in San Francisco may make $70K per year and be near the poverty line, yet be in the same tax bracket as a professional living in Nebraska who is living well above the poverty line.
That's true, but market forces modulate this, in particular because the barriers to entry are low. So a Nebraskan cleaning lady probably doesn't make 70K (lower demand and probably plenty of supply) while my cleaning lady lives in a nice neighborhood (college terrace) in Palo Alto (she rents, but owns two other houses in the bay area), has put three kids through the Palo Alto schools, and has a good health plan. So for her taxes she's getting a lot. My gardner lives in RWC -- I ran into him once at the OSH and discovered he lives around the corner also in a nice neighborhood. If their income didn't allow them to live in the area the income would have to rise, else the supply would dry up.
What's a "cleaning lady" or a "gardner" in this context? Someone who runs a cleaning or landscaping business and maintains private homes may be quite well off, but someone who is a hotel maid or a janitor probably isn't.
There's a large camp that claims dedicated performance of simple tasks, like cleaning, is no longer sufficient to make a decent living in post-industrial America, so anecdotal counterpoints to that are of interest.
The lady who cleans the offices at my work drives a nicer car than I do (software engineer). Dedicated worker, always friendly.
This is in Palo Alto.
I've been astounded at the cost of certain things in the area. I regularly see people looking for child-care at $35+/hour, whereas it paid $20-25 at the very high end for multiple children and a highly qualified person in my area in southern california. Getting a good plumber or handyman to come by for less than a small fortune is seemingly impossible unless it's a personal referral.
I think that if your home base is taken care of (i.e. you have owned for a while or managed to rent from someone who doesn't raise the rent by 10% every year) it's possible to get by with dual non-degreed employment. Getting ahead on the other hand - saving up for a home and padding other savings AND paying escalating rent at the same time while not living frugally with extreme measures is very tough for people in the highest paying job sectors.
True, my gardener has a guy that works with him when there's a lot to do. The cleaning lady is just a cleaning lady. I had to I-9 them and have them on a payroll system.
Well they aren't particularly big or particularly close (one's on the other side of the SC mountains) so I doubt that together they would be worth a million, but they constitute a good retirement account. I do know that she needs the rental income + her salary to make rent in Palo Alto. Given her income I can't imagine she could get a HELO from them, but once the kids finish school she could move into one of them I suppose.
Prop 13 is great for her, since her gains are paper only and her property taxes have been predictable.
It's a tax on land itself not including improvements that's designed to tax landowners based on the value that being located where it is in the community and in relation to shared resources adds to the property. The idea is that this is relatively fair compared to other tax schemes in that it (ideally) maps closely to the value the landowners are deriving from the taxes they're paying, and encourages high levels of development on land with good infrastructure and in good locations. It's also easier to collect than many other forms of taxation, which is nice.
As covered in the Wikipedia article, the main problem with it is accurately assessing the value of the land. Which is kind of a big deal, obviously.
So it would be a double tax since the current property tax already accounts for value of location. The appraised value used is not just the improvements but the overall value which would include things like location.
How does taxing one fewer aspects of something make it a "double tax"? It's not a "half-tax" either, but at least that would make more sense, unless I'm missing something.
There is a vast difference in the value of $100 within states too. For example, western New York state (eg, Buffalo area) is far cheaper than NYC in terms of median home prices, supermarket prices, etc. Similarly, Richmond VA is far cheaper than the Northern Virginia / DC suburbs area.
You might also consider weighting the state average by population. Populations tend to cluster in cities so I think you'll see the "experienced" cost go higher.
Cape Cod and Boston prices vs Springfield, New Bedford, Fall River and Worcester prices. South of Portland and east of I95 prices vs Bangor prices. There's a lot of interesting information lost by looking at state sized areas. Doing this on a county, or even town level would be far more interesting IMO. More contrast on the map would be nice too.
The crazy thing isn't the real value of $100 spent on private goods and services. It's the value of $100 spent in taxes.
Federal tax receipts in California, Illinois and New York subsidize Florida, Texas and much of the south.[0] The hypocrisy of fiscal conservatism is that it is enabled by giant high-tax Democratic states.
There are a lot of ways to look at contribution of natural resources. Per capita the military is disproportionately made up of recruits from poorer rural states. Alaska, Texas and Louisiana contribute oil and gas. The Midwest allowed tens of millions of immigrants to move to the US, assimilate, and raise large families which then fueled the economies of larger states like California. Most importantly the diversity of viewpoints represented by 50 states introduces some modicum of competition into the political sphere allowing the United States to remain a real life laboratory of democracy wherein citizens are able to observe different approaches and vote with their feet to promote good governance.
Natural resources are fungible, importing oil is a non issue when when it costs more to subsidize Alaska then we gain in Oil. It's important to at least recognize that Republican ideas result in worse economy's. After all insanity is doing the same thing over and over thinking this time will be different.
Diversity has an optimal threshold. The more thoughts and viewpoints the better, until agreements can no longer be reached. I think the general feeling right now is that we've crossed into a suboptimal zone where government has trouble acting.
Other comments have good points, but the main thing IMO is that tax receipts are low in the midwest / south is that what they produce (food) is incredibly cheap now days.
The US produces a ridiculous surplus of food with a tiny portion of the population because we're incredibly good at doing it cheaply. High volume and low cost == low prices == low tax revenue. It doesn't mean low real-world value or produced value.
You could "fix" it by trying to balance revenues by playing with tax rates, but all you'll accomplish is making food expensive in CA/NY, shifting dollars around, and making everything more complicated than it is now.
There are plenty of other reasons tax revenue registers in NY/CA; anyone -- from anywhere in the country -- with a retirement account is funneling it through some NY mutual fund, and entertainment is still mostly produced in CA. If NY didn't exist, it would be managed somewhere else; it's not that NY is producing magical value nobody else understands. It's just most convenient.
If Hollywood stopped producing movies... we'd all be a bit more bored temporarily, but it's again going to get bought from somewhere else.
You realise food is cheap because of taxes/subsidies. If we had to pay the true cost of food it would be expensive. And the politician that did wouldn't be liked much as well.
Can you show the calculation where subsidies to food are greater than the cost of regulation of food?
Sugar is particularly regulated, with the government strict quotas and tariffs on imports, and domestic allotments to produces. If you produce more than your allotment, it is illegal to sell in the US. The whole scheme is to hold prices high to support famers (agribusiness really), not low.
Sugar is regulated and the price is kept high for farmers. But not for the consumers which is my point. Farmers are given subsidies in all crops so they can sell them in the global market at below market rates, not only for the population, but to compete with out countries doing the same thing.
Tax receipts are low in the midwest / south also because tax rates are low. This study rewards California and NY for having extremely high state taxes - it doesn't reflect actual federal dependency.
This continual transfer of wealth between different regions and cultures is what allows the U.S. to be successful while the EU is a quagmire. Federalism ftw. Federalism even works great in Germany.
And yes, I'm pretty much OK with my portion of California taxes going to Alabama, because society is not a zero-sum game.
Those are the same states that would be for a flat rate tax or even more so a flat fee tax, but I'm sure you wouldn't be, so where's the hypocrisy? Progressive tax rates exacerbate the issue you're pointing out and they are strongly opposed by conservatives, and supported by California, New York liberals.
Being a liberal and complaining about high tax rates, while blaming those against high taxes is kinda rich no?
Another point, those places also would be more amendable to pushing more responsibilities on the states away from federal govt reducing even more the imbalance of higher federal taxes paid by higher cost states.
Exactly! It is hypocritical for proponents of progressive taxes to complain simply because the fiscal conservative states are benefiting from progressive taxes. Certainly it is not hypocritical for the fiscal conservative States to want to change a system that is current benefiting them to make it flat for everyone.
The other thing I am not sure about is why OP highlights high tax Democratic States, no doubt that is what they are, but it is not applicable applied to Federal Income Taxes where everyone, regardless of State, is subject to the same progressive tax rates.
>why OP highlights high tax Democratic States, no doubt that is what they are, but it is not applicable applied to Federal Income Taxes where everyone, regardless of State, is subject to the same progressive tax rates.
The poster above highlights not the tax rates, but ratio of receipts vs. expenditures of federal taxes in given states. Poorer states get well over one dollar in federal program spending for each dollar they contribute, while richer states have a net outflow, subsidizing the poorer states' programs.
I see how I could have misinterpreted High Tax Democratic States.
However, take the post argument, Blue States (CA, NY, IL) subsidize red States (FL). Revising my position from tax rate (which is equal across the board) to State expenditures (taxes the States pay to the Federal Government) CA is #1, NY is #3, IL is #4. Still FL is #5 (and another red state, TX is #2).
I think my point remains it is not hypocritical that Red States are getting more (receipts) back under the current system while simultaneously pushing for reforms.
Let me try rephrasing the hypocritical point from the pro progressive tax position. Warren Buffett is always pushing for tax reforms to raise taxes on the wealthy, and to highlight his issue he always points to the fact his secretary annually pays a higher tax rate than he ultimately does. However, nothing stops Warren Buffett from not taking advantage of the tax loop holes and personally paying more himself, but he doesn't. In my mind it doesn't make him a hypocrite for taking advantage of a system he wants to change.
That's only 1 of 3 pieces of data. If they only used the one you mention, then you wouldn't get the red/blue divide, you'd instead get a small/large state divide.
What this study does to get the red/blue divide dividing federal revenues by state revenues. So low tax, low spending states look bad because the Federal inflow is a bigger percentage of total spending.
I was saying that you help Them, not the reverse. And if they're completely unclear, but I think they've put some effort into making some statement that just isn't coming across, I just ask. Something like "could you clarify? I don't see what you mean by somethingsomething in light of othersomething." Granted, I don't win many online debates that way, but really all I'm trying to do is get the person to consider some other way of looking at the picture.
Maybe you are being willfully ignorant, or maybe you live in such a monoculture, different ideas are like a foreign language you can;t deal with or understand?
There's nothing inherently hypocritical about fiscal conservatism as your comment tries to imply. Republican != fiscally conservative (barring some lip service). I suspect you'd find most people who are genuinely fiscally conservative are the most well off people around.
Their methodology leaves something to be desired. The resident dependency score unfairly penalizes states that have large federal presences to to geography (like Texas and New Mexico). Furthermore, the idea of measuring state government dependence as a ratio is pretty much guaranteed to make states with low overall budgets look bad. The per-capita state budget contribution would be much more interesting.
I think the effect of this is most insidious in infrastructure spending. And I'm not talking about major highways, which naturally go through rural and poorer areas while actually serving the urban areas they connect.
The urban areas tend to have people who insist upon higher taxes, while the people in the rural areas commonly want the reverse. Meanwhile, because of those taxes being redistributed in the way they are, money that could go toward mass transit in cities is instead being funneled to road projects in rural areas. With all that money, the rural areas are able to secure funding (but not in any way, shape, or form afford) oversized infrastructure so they can turn their places into post-apocalyptic wastelands of Walmarts and car sewers.
Rural towns may develop in horrendously bad ways, but at least if they were less well-fed by federal and state programs they might come to meet the reality that their development patterns are completely unsustainable.
You're confusing suburb and rural- rural areas have well water and septic tanks, 2-lane roads that eventually lead to the Walmart near the interstate. And the money is state and local, not federal, unless you have a senator that really swings above his weight class (like a Kennedy or Byrd).
I should have been more diligent by including suburbs in my comment. Furthermore, you're very right that the water and sewage is even more important than roads, and that overbuilding happens in the suburbs. But you may also have an overly optimistic picture of rural areas, because I can think of quite a few four lane highways where I grew up that go out into relative nowhere, and do so at huge cost. There's a town of 20k people there that has a beltway!
I wonder what that looks like when your factor out military expenditures (which most conservatives would say is one of the few legitimate federal expenditures).
Doesn't matter, they will complain no matter what. The current system of sharing wealth with poor states from rich states is exactly the system they advocate, then complain when they realize what it actually means. Anyone that makes that silly comparison is just complaining about the people who are benefiting; they want to help their poor people, not the other poor people.
From 1876 to 1992, 116 years in a row, Mississippi had a Democratic governor. Do you think it is poor because The last 2 guys running the state were Republicans, or that 116 years of policy, and the legacy slavery on top of that?
I see that the tax foundation says Georgia is $108, but there is a huge caveat. I've lived in Georgia the past 8 years. I've lived in both middle of no where and currently live in Atlanta. The value of $100 is vastly different between those two areas. Georgia is mostly rural, except for Atlanta. My old apartment, 1 bedroom a bath, I can still rent for $575 a month. Lakeside view with a pool, 10 minutes from work. Anyone reading this, most likely will be moving to Atlanta. The COLA is still cheap, but understand the caveat.
Meanwhile, I grew up in Florida, where it says $100 is pretty much $100. There are lots of major cities in Florida and cost of living is more distributed.
I'd be more interested in the real value of $100 of income in each state, which would account for differences in state income tax. On such a map, WA would look significantly better, and states such as CA and NY would look even worse.
Agreed - this would be really interesting broken by county. Santa Barbara County versus Modoc County in California; Multnomah County versus Lake County in Oregon; etc.
I'm not suggesting a cause/effect relationship here, but there is an interesting rough correlation between the map in the article and the red/blue political map...
Can someone please explain why NJ is such a fucked state? Is it just because of the population density, is it the years of government corruption? I just don't get how cost of living here is so nuts and how our economy feels so..."poor"?
I was thinking the same thing and also on the cities to state level.
My though is that dense urban cities (e.g. New York, LA, San Francisco) are going to have a lower value due to the high cost of real-estate and also rural areas where a lack of population density leads to distribution inefficiencies in material goods raising their cost. States like Ohio and Georgia with large suburban areas have a balance of cheaper real-estate and high enough population density lower the distribution costs of material goods.
I thought it peculiar that there was no state whose nearest-whole-dollar value was $100 - Florida at $100.91 was the closest. There's a surprising number of states which are _substantially_ higher or lower than the average. I'm sure there's some term in statistics where the mean is pretty far off the median - but not sure what that is, or what it implies
This is a helpful graphic, but I think it’s incomplete -- and substantially understates CA's COL. That’s because it measures what AFTER TAX dollars buy (as I understand it). Hence income tax free states have an even bigger “bang for the buck” advantage. I prefer to use the Missouri COL comparison of states:
https://www.missourieconomy.org/indicators/cost_of_living/
I do a moderate amount of travelling for my job (in the federal gov't), and DC is one place that I find very, very hard to make things like meals fit within the prescribed allowance. Bay Area? no problem eating on the cheap, even right around where I need to be (e.g. moffet field). DC? it's usually much harder.
Lodging, on the other hand, is one where the Bay Area seems to be happy to compete with DC's expense levels...
I wonder what this would look like applied specifically to housing. I suspect that people in expensive areas are paying significantly more (both absolute and as a percentage) on housing. In some ways, this is just a side effect of that phenomenon---housing prices eventually trickle down to everything else.
Relatively speaking. I live in the mountains of North Carolina and the housing prices are double that of Charlotte. Everything is custom build, there aren't prefab houses. Labor is relatively the same, but food and gas cost's more. You can't really go by state. You'd have to go by county with multiple variables to get a real picture.
The correlation between their map and the 2012 electoral college map is striking! The light-colored (expensive) states are the blue states and the dark-colored (cheap) states are the red states, more or less.
They need to break the states up too. Southern California $100 is a lot different than a Northern California $100. $100 living along the coast is a lot different than $100 living inland.
SoCal and NorCal aren't as different as you'd think - having lived in both places and as one who spends a lot of time between them, I doubt there'd be much noticeable at all.
Now Central Valley life can be a lot cheaper than coastal life - no doubt about that. I have a vacation home in he Central Valley and everything we do here and for the home is cheaper. Painting, repair work, labor, gas, auto and boat repairs, everything.
What are you implying? The article is basically a graphical representation of some math done on publicly available figures. If the figures or math are wrong, or if the graphical representations are disingenuous, explain why. But to just say "yeah, well it's The Tax Foundation so whatever" is a cop out to avoid actually discussing the point the article attempts to make.
I'm in no means an expert in this, but I think it's because of the relative sizes of the economies in each state [1]. California and New York are very large in terms of GDP/GSP and will therefore move this weighted average accordingly.
How does this affect online pricing? Assuming something bought online has the same price for all shipping locations, this would mean that people in expensive states are more likely to save money by shopping online?
Much of the difference is in land/home values, but, yes, it would mean that people in states like Hawaii would save more by shopping online. (This of course assumes that the online store doesn't pass along the increased transportation cost in the form of higher shipping.)
Alaska and Hawaii are pretty much outliers. Essentially everything is expensive whether it's at a local store or because of shipping surcharges. (Although Amazon Prime still covers both states--which I imagine is quite a big win for residents of those states compared to historically.)
> In other words, by this measure, if you have $50,000 in after-tax income in Mississippi, you would have to have after-tax earnings of $68,000 in the District of Columbia just to afford the same overall standard of living.
I imagine it is much easier to earn $68k after taxes in DC than it is to earn $50k after taxes in Mississippi.
Assuming the $68k in DC / $50k in MS is the benchmark, my point was that while it's much cheaper to reach that benchmark in MS, you're probably much more likely to reach it in DC. So a random person in DC is probably more likely to earn $68k or more than a random person in MS is to earn $50k or more.
It would be interesting to see an illustration of how regressive Federal tax brackets are when you consider the state-by-state cost of living differences. Some of the most populous states have the highest cost of living.