I won't spend much time talking about Greece as there are plenty of other places where information on their failed policies and pending default can be found that will be much more informed than I am capable of being. However, I do find myself as a resident of the State of California, which may find itself in a similar situation if serious changes are not made, and soon.
I've been living in California for nearly two years now, and I've noticed some striking tax differences between California and my native state, Pennsylvania. Unlike in California, though, I never heard people discussing how much debt Pennsylvania carried and how broke the state was. Now, don't get me wrong, PA does actually have a substantial debt of upwards of $121 billion, but that pales in comparison to the wall of debt that CA has to overcome, estimated at $433 billion.
What I find striking, though, is the amount of revenue the CA state government should be able to rely on yearly. Granted, through some accounting gimmicks, the government has been able to pass "balanced budgets" these past three years, but they don't seem to be chipping away at the massive debt, like the pension funds that are eating California.
On an anecdotal level, I'd like to compare living in PA and paying taxes to living in CA and paying taxes. First, I'll start with the most obvious tax, the income tax. In PA, every individual pays a flat tax rate to the state of 3.07% of their wage, right off the top. They are also required to pay their locality, usually 1-2%. In my case, my locality took 1%. In CA, there's no locality income tax, only the state, but the state income tax is not flat. The tax rate is progressive, much like the Federal Income tax, and one can expect to pay between 7-12.3% as an individual. Right out of the box I'm already paying probably double in taxes to CA than I was to PA and my locality. I also pay an Unemployment Insurance tax and State Disability tax to CA that I also paid in PA. However, in PA, this tax was never more than a couple of dollars at .09% of my wages. Here in CA, I pay a much higher .9%, which is a full ten times more.
Now that the CA state government has wreaked havoc on my paycheck, you'd think my tax burden would decrease compared to PA elsewhere. Unfortunately, that's wrong. I'll start with the easiest, namely, property taxes. I don't own property (mainly because the government taxes me far too much and I can't save any money to make a down payment on a house), but if I did, I could expect to pay between 1-1.75% of the property's value straight to the government of CA and San Bernardino County. The average tax rate in my native Beaver County was actually a bit higher than the average in San Bernardino at 1.7%. I would celebrate CA on this lower tax rate if it weren't for the fact that house values in Southern California make most of the rest of the country look like a cheap place to live. In San Bernardino alone, the median house value sits at $263,400, which is more than double Beaver County's $120,800. Add to that the huge difference in populations (170k in Beaver County vs 2.088 million in San Bernardino), and you're set to expect a windfall in extra property tax revenue here in San Bernardino that Beaver County could only dream of ever having.
This post is getting a little long, so I'm going to run through the rest. Want to get your vehicle registered in CA? Prepare to pay upwards of $200 a years instead of the measly $35 PA charges. Need to purchase something that's not food related? I hope you're happy with the 8-12% sales tax rate as compared to the 6-7% rate from PA. Find yourself pulled over for speeding or some other traffic violation? Expect to pay at least $300, which is about the lowest figure I've heard from anyone I've met who's been given a fine for a traffic violation around here. In PA, where my father-in-law always complained of how expensive speeding tickets were, I never heard anyone tell me about a fine above $200. Anecdotal, I know, but it gets my point across. Buying gas? I hope you don't mind paying 50 cents to a dollar more than most other places in the country.
The list goes on, but I believe I've made my point. Between the literally millions of people living in California and the much higher tax rates on nearly everything, California should be bringing in plenty enough revenue to avoid budget deficits and debt. What we see, however, is completely irresponsible spending and complete refusal to admit this to their constituents. Just look at the claimed percentage of the budget devoted to payroll and benefits of government employees vs the actual percentage, where we see government officials outright lying to us. I mean, 10% and 67% are a little different. And, yes, CA government employees may have relatively lower salaries compared to private employees, but they still see an effective wage jump of 30% over private employees when you count all of the benefits of being a state employee. Tie that to the fact that nearly 15% of all employed individuals in California work directly for the state (and I don't believe that number counts any teachers or medical professionals paid by the state), and you see why the government's payroll is just out of control. During the recession, CA private employers cut 6.22% of their labor force. I'm impressed to see the government's labor force actually dropped, too, but only by 1.17%. To make things worse, I haven't even touched on social welfare programs, of which California is the number one state in the country in terms of caseloads.
Oh, and did I mention the famous high speed rail that the governor keeps pushing for?
So, how does this relate to Greece? I am sure that the reason Greece is broke is similar to the reason California is broke. Out of control spending, burgeoning pension and welfare programs, and a complete departure from reality in terms of taxation and regulation.
Businesses are not flourishing in California, where tax rates are high and tax codes are convoluted. I've personally met businessmen who have moved from California to neighboring Nevada to avoid some of the convoluted regulations and expensive tax burdens of California. Add to that crushing regulations about "employee protection" and I find myself driving past hundreds of empty buildings every week that may never be filled in my lifetime. Again, I'm going anecdotal, but my point is clear: California is driving away business with its horrible and expensive policies, which, in the end, will only make government spending increase as more and more people find it difficult to find work outside the government. Already California's unemployment rate is over a full percentage point higher than the national average at 6.4%.
Being the world's 8th largest economy will not help California from becoming Greece if we don't learn some lessons from Greece and start making serious changes to the state's spending and regulations. Let's hope our leaders can start making the difficult choices, or that we can elect some new ones that will.
I've been living in California for nearly two years now, and I've noticed some striking tax differences between California and my native state, Pennsylvania. Unlike in California, though, I never heard people discussing how much debt Pennsylvania carried and how broke the state was. Now, don't get me wrong, PA does actually have a substantial debt of upwards of $121 billion, but that pales in comparison to the wall of debt that CA has to overcome, estimated at $433 billion.
What I find striking, though, is the amount of revenue the CA state government should be able to rely on yearly. Granted, through some accounting gimmicks, the government has been able to pass "balanced budgets" these past three years, but they don't seem to be chipping away at the massive debt, like the pension funds that are eating California.
On an anecdotal level, I'd like to compare living in PA and paying taxes to living in CA and paying taxes. First, I'll start with the most obvious tax, the income tax. In PA, every individual pays a flat tax rate to the state of 3.07% of their wage, right off the top. They are also required to pay their locality, usually 1-2%. In my case, my locality took 1%. In CA, there's no locality income tax, only the state, but the state income tax is not flat. The tax rate is progressive, much like the Federal Income tax, and one can expect to pay between 7-12.3% as an individual. Right out of the box I'm already paying probably double in taxes to CA than I was to PA and my locality. I also pay an Unemployment Insurance tax and State Disability tax to CA that I also paid in PA. However, in PA, this tax was never more than a couple of dollars at .09% of my wages. Here in CA, I pay a much higher .9%, which is a full ten times more.
Now that the CA state government has wreaked havoc on my paycheck, you'd think my tax burden would decrease compared to PA elsewhere. Unfortunately, that's wrong. I'll start with the easiest, namely, property taxes. I don't own property (mainly because the government taxes me far too much and I can't save any money to make a down payment on a house), but if I did, I could expect to pay between 1-1.75% of the property's value straight to the government of CA and San Bernardino County. The average tax rate in my native Beaver County was actually a bit higher than the average in San Bernardino at 1.7%. I would celebrate CA on this lower tax rate if it weren't for the fact that house values in Southern California make most of the rest of the country look like a cheap place to live. In San Bernardino alone, the median house value sits at $263,400, which is more than double Beaver County's $120,800. Add to that the huge difference in populations (170k in Beaver County vs 2.088 million in San Bernardino), and you're set to expect a windfall in extra property tax revenue here in San Bernardino that Beaver County could only dream of ever having.
This post is getting a little long, so I'm going to run through the rest. Want to get your vehicle registered in CA? Prepare to pay upwards of $200 a years instead of the measly $35 PA charges. Need to purchase something that's not food related? I hope you're happy with the 8-12% sales tax rate as compared to the 6-7% rate from PA. Find yourself pulled over for speeding or some other traffic violation? Expect to pay at least $300, which is about the lowest figure I've heard from anyone I've met who's been given a fine for a traffic violation around here. In PA, where my father-in-law always complained of how expensive speeding tickets were, I never heard anyone tell me about a fine above $200. Anecdotal, I know, but it gets my point across. Buying gas? I hope you don't mind paying 50 cents to a dollar more than most other places in the country.
The list goes on, but I believe I've made my point. Between the literally millions of people living in California and the much higher tax rates on nearly everything, California should be bringing in plenty enough revenue to avoid budget deficits and debt. What we see, however, is completely irresponsible spending and complete refusal to admit this to their constituents. Just look at the claimed percentage of the budget devoted to payroll and benefits of government employees vs the actual percentage, where we see government officials outright lying to us. I mean, 10% and 67% are a little different. And, yes, CA government employees may have relatively lower salaries compared to private employees, but they still see an effective wage jump of 30% over private employees when you count all of the benefits of being a state employee. Tie that to the fact that nearly 15% of all employed individuals in California work directly for the state (and I don't believe that number counts any teachers or medical professionals paid by the state), and you see why the government's payroll is just out of control. During the recession, CA private employers cut 6.22% of their labor force. I'm impressed to see the government's labor force actually dropped, too, but only by 1.17%. To make things worse, I haven't even touched on social welfare programs, of which California is the number one state in the country in terms of caseloads.
Oh, and did I mention the famous high speed rail that the governor keeps pushing for?
So, how does this relate to Greece? I am sure that the reason Greece is broke is similar to the reason California is broke. Out of control spending, burgeoning pension and welfare programs, and a complete departure from reality in terms of taxation and regulation.
Businesses are not flourishing in California, where tax rates are high and tax codes are convoluted. I've personally met businessmen who have moved from California to neighboring Nevada to avoid some of the convoluted regulations and expensive tax burdens of California. Add to that crushing regulations about "employee protection" and I find myself driving past hundreds of empty buildings every week that may never be filled in my lifetime. Again, I'm going anecdotal, but my point is clear: California is driving away business with its horrible and expensive policies, which, in the end, will only make government spending increase as more and more people find it difficult to find work outside the government. Already California's unemployment rate is over a full percentage point higher than the national average at 6.4%.
Being the world's 8th largest economy will not help California from becoming Greece if we don't learn some lessons from Greece and start making serious changes to the state's spending and regulations. Let's hope our leaders can start making the difficult choices, or that we can elect some new ones that will.
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