The Manhattan Institute is an explicitly conservative political organisation. That doesn't inherently invalidate any of the conclusions they draw, but readers should be aware that they have been made with a pro-free market, anti-big government mindset. Others may draw quite different conclusions from the same facts.
I don't think this is relevant. The reason that people for the most are leaving is not politics or taxes, but high cost of living. The biggest expense for most people is housing. From 1930-2000, almost everyone who moved to CA made money on exploding real-estate values, eithe directy or indirectly. This extended massively peoples wealth, so they lived in houses and with a lifestyle they could never afford based on their "day jobs". Now that the elevator of home-equity is no longer subsidizing cost of living, most people realize that there are a lot more $1MM houses in CA than $300K/yr jobs. And where there are those kind of jobs, a $1M house doesn;t get you much beyond the basics (like in SF/palo alto etc).
I think it obviously does matter. The conclusion of the paper was clearly written before the rest of it. Gems totally unsupported by the preceding evidence include "California has cut taxes in the past, most dramatically with 1978’s Proposition 13, and when it has done so, prosperity has followed. Ballot propositions this November aim to do the reverse, raising taxes on business owners while the state is still struggling to hold its own against more aggressive, confident rivals. The results will send a strong signal, whichever way they go: the state’s voters will be deciding to continue on the path of high taxes and high costs—or to make a break with the recent trend of decline" and other whoppers. Even the title is ridiculous unless you are willing to define "exodus" as "growing at the same pace as the nation as a whole".
The point is taxes are second order. Locally (st.city) are based on either property values and incomes. (1) if incomes cannot support paying the housing costs, they cannot support higher taxes, because there is no excess earning power; (2) if people cant pay the rent, then they are likely to move away to "somewhere more affordable". Most people spend ~30 pc of their income on tax and another ~30pc income on housing. So those are material numbers. When housing was going up=up=up, the mismatch of income to consumption was masked. Lower income supported higher living b/c the real-estate capital gains was not taxed and the grand-fathered real-estate became a lower % of income as salaries rose proportionate to real estate. So, if you had a 10 year house, you had $500K appreciation in the bank (no tax) and maybe a morgage taking only 15% of income b./cause it was bought cheap. this leaves a lot to pay taxes no problem. But same people cannot make math work if they need 30 pc after tax to pay rent, and 30 pc to pay tazes. 40%r residual for save/consume vs 55% is almost 1/3 drop, and a big difference. If gov;t ups taxes anothe 5%, then 55 to 35 is even bigger hit. But without the 500k in appreciation per decae accruing to savings, the 35% needs even more to be allocated to savings. So spendin cash mabed is only 20-25% from 55% in this example. In other words, that is a huge pay cut doing same work, etc. And that knind of pay-cut (1/2 order of magnitude) will cause people to look for new places to live. The taxes issue is more a problem for businesses (who are next in line after consumers to get taxed), but it is the residential people moving out that is the focus of the discussion for the most part here.
I think there might be some nuance in the composition of the leavers vs the comers. This is purely speculative, but one could imagine that in SF:
- leavers are mainly people with established jobs, thinking of starting a family, who want more house per dollar (and more post-tax dollars per salary dollar)
- comers are mainly early 20s unattached aspiring professionals who aren't hit as hard by high real estate prices (price to rent ratios are still very high in SF), and who also don't yet have a large income against which to evaluate the tax impact
This kind of dynamic would result in a "perpetual churn" as each generation matures through their professional lifecycle, each time opening new jobs and housing opportunities (and thus the near-zero net migration).
Again, very speculative. But your observation made me scratch my head for a bit and this was the best explanation I could muster aside from "people just like SF and don't leave despite economic pressure".
That makes sense. The Bay Area also has a lot of H1B and other (legal, not tied to agriculture and thus inherently migratory) immigrants, too (in the tech sector), relative to the rest of California.
OTOH, it's pretty safe to say Californians outside of the Bay Area and maybe LA tech industry are struggling at all ages, so if you live in Redding, and don't own a productive farm or something, jumping up to Oregon or Nevada isn't a big compromise.
I can kind of justify California taxes and other expenses if you get the benefits of industry concentration, and maybe even if you are tied in with UC somehow, but for a person working in a fast food restaurant or light machining job or something, there's a lot less to tie you to California vs. a place with faster growth.
I think that is an important observation. The total population might be stable or slightly rising; however, that should not be interpreted as no one leaving and only a few people moving in. It's has to do with the churn, or velocity of people coming in and then going out (leaving) as children begin reaching school age. The (public) schools, which very few exceptions, are terrible and just about everyone I know who has young children has plans on moving somewhere with better schools when it comes time.
Yes the city has many cultural and civic attractions, but they do not outweigh the educational deficit, for those with young children. For singles and for empty nesters the city is perfect, for people with young families the dearth of good public educational institutions is maddening. The wealthy can afford to send their children to private schools, everyone else cannot.
Well, I would think some people roll in taxes as part of cost of living. Especially with California with its taxes disguised as "fees". But cost of housing is a huge factor as you say.
The article has an agenda to promote low taxes. It casts the net flow of head count out of California as bad. In the Bay Area where I live, I personally see that when people talk of leaving they complain of the cost of living, but that is a consequence of how prosperous the Bay Area is for some industries. If the top destinations include Nevada and Arizona then I imagine we are reading of a migration of retirees as well people in softening industries. It is natural for societies to have premium destinations.
If we had lower taxes like Texas, perhaps more retirees could afford to live here, but I would rather have a state with better infrastructure and better institutions. Why should we have poor state resources because because some can no longer afford to live in an area where their homes are now worth 5x the price of when they bought them? As a parent I want good schools.
Side note: I don't think it is a coincidence that one of the top searches for 'State Tax' is www.retirementliving.com/taxes-by-state, and that the Republican Party (the party of no-taxes-no government-except-for-medicaid) is the party for old people.
> Are we going to do this for all submissions? Newspapers' leanings, political donations of blog authors...?
Well, this isn't an institution that most people are familiar with. For example, most people know the New York Times is liberal and that the Wall Street Journal is (moderately) conservative. We wouldn't need someone to point that out. But in this case, the OP's information is helpful in analyzing the source for any bias.
We expect a certain about of editorial bias from newspapers, and we accept that individuals are going to have their own biases, but it's often not obvious whether a generically named organisation is tied to an ideology or not. This isn't a dispassionate report written by someone who incidentally holds certain political views, it's a report written with the express purpose of influencing public policy in line with a specific ideology. Knowing that is important in judging its conclusions, just as knowing whether a report on climate change has been funded by a windmill manufacturer may alter your impression of its claims.
Comments
The Manhattan Institute is an explicitly conservative political organisation. That doesn't inherently invalidate any of the conclusions they draw, but readers should be aware that they have been made with a pro-free market, anti-big government mindset. Others may draw quite different conclusions from the same facts.
I don't think this is relevant. The reason that people for the most are leaving is not politics or taxes, but high cost of living. The biggest expense for most people is housing. From 1930-2000, almost everyone who moved to CA made money on exploding real-estate values, eithe directy or indirectly. This extended massively peoples wealth, so they lived in houses and with a lifestyle they could never afford based on their "day jobs". Now that the elevator of home-equity is no longer subsidizing cost of living, most people realize that there are a lot more $1MM houses in CA than $300K/yr jobs. And where there are those kind of jobs, a $1M house doesn;t get you much beyond the basics (like in SF/palo alto etc).
I think it obviously does matter. The conclusion of the paper was clearly written before the rest of it. Gems totally unsupported by the preceding evidence include "California has cut taxes in the past, most dramatically with 1978’s Proposition 13, and when it has done so, prosperity has followed. Ballot propositions this November aim to do the reverse, raising taxes on business owners while the state is still struggling to hold its own against more aggressive, confident rivals. The results will send a strong signal, whichever way they go: the state’s voters will be deciding to continue on the path of high taxes and high costs—or to make a break with the recent trend of decline" and other whoppers. Even the title is ridiculous unless you are willing to define "exodus" as "growing at the same pace as the nation as a whole".
The point is taxes are second order. Locally (st.city) are based on either property values and incomes. (1) if incomes cannot support paying the housing costs, they cannot support higher taxes, because there is no excess earning power; (2) if people cant pay the rent, then they are likely to move away to "somewhere more affordable". Most people spend ~30 pc of their income on tax and another ~30pc income on housing. So those are material numbers. When housing was going up=up=up, the mismatch of income to consumption was masked. Lower income supported higher living b/c the real-estate capital gains was not taxed and the grand-fathered real-estate became a lower % of income as salaries rose proportionate to real estate. So, if you had a 10 year house, you had $500K appreciation in the bank (no tax) and maybe a morgage taking only 15% of income b./cause it was bought cheap. this leaves a lot to pay taxes no problem. But same people cannot make math work if they need 30 pc after tax to pay rent, and 30 pc to pay tazes. 40%r residual for save/consume vs 55% is almost 1/3 drop, and a big difference. If gov;t ups taxes anothe 5%, then 55 to 35 is even bigger hit. But without the 500k in appreciation per decae accruing to savings, the 35% needs even more to be allocated to savings. So spendin cash mabed is only 20-25% from 55% in this example. In other words, that is a huge pay cut doing same work, etc. And that knind of pay-cut (1/2 order of magnitude) will cause people to look for new places to live. The taxes issue is more a problem for businesses (who are next in line after consumers to get taxed), but it is the residential people moving out that is the focus of the discussion for the most part here.
The funny thing is the counties where people weren't leaving (SF) had the highest housing prices.
I think there might be some nuance in the composition of the leavers vs the comers. This is purely speculative, but one could imagine that in SF:
- leavers are mainly people with established jobs, thinking of starting a family, who want more house per dollar (and more post-tax dollars per salary dollar)
- comers are mainly early 20s unattached aspiring professionals who aren't hit as hard by high real estate prices (price to rent ratios are still very high in SF), and who also don't yet have a large income against which to evaluate the tax impact
This kind of dynamic would result in a "perpetual churn" as each generation matures through their professional lifecycle, each time opening new jobs and housing opportunities (and thus the near-zero net migration).
Again, very speculative. But your observation made me scratch my head for a bit and this was the best explanation I could muster aside from "people just like SF and don't leave despite economic pressure".
That makes sense. The Bay Area also has a lot of H1B and other (legal, not tied to agriculture and thus inherently migratory) immigrants, too (in the tech sector), relative to the rest of California.
OTOH, it's pretty safe to say Californians outside of the Bay Area and maybe LA tech industry are struggling at all ages, so if you live in Redding, and don't own a productive farm or something, jumping up to Oregon or Nevada isn't a big compromise.
I can kind of justify California taxes and other expenses if you get the benefits of industry concentration, and maybe even if you are tied in with UC somehow, but for a person working in a fast food restaurant or light machining job or something, there's a lot less to tie you to California vs. a place with faster growth.
I think that is an important observation. The total population might be stable or slightly rising; however, that should not be interpreted as no one leaving and only a few people moving in. It's has to do with the churn, or velocity of people coming in and then going out (leaving) as children begin reaching school age. The (public) schools, which very few exceptions, are terrible and just about everyone I know who has young children has plans on moving somewhere with better schools when it comes time.
Yes the city has many cultural and civic attractions, but they do not outweigh the educational deficit, for those with young children. For singles and for empty nesters the city is perfect, for people with young families the dearth of good public educational institutions is maddening. The wealthy can afford to send their children to private schools, everyone else cannot.
Well, I would think some people roll in taxes as part of cost of living. Especially with California with its taxes disguised as "fees". But cost of housing is a huge factor as you say.
The article has an agenda to promote low taxes. It casts the net flow of head count out of California as bad. In the Bay Area where I live, I personally see that when people talk of leaving they complain of the cost of living, but that is a consequence of how prosperous the Bay Area is for some industries. If the top destinations include Nevada and Arizona then I imagine we are reading of a migration of retirees as well people in softening industries. It is natural for societies to have premium destinations.
If we had lower taxes like Texas, perhaps more retirees could afford to live here, but I would rather have a state with better infrastructure and better institutions. Why should we have poor state resources because because some can no longer afford to live in an area where their homes are now worth 5x the price of when they bought them? As a parent I want good schools.
Side note: I don't think it is a coincidence that one of the top searches for 'State Tax' is www.retirementliving.com/taxes-by-state, and that the Republican Party (the party of no-taxes-no government-except-for-medicaid) is the party for old people.
> The Manhattan Institute is an explicitly conservative political organisation.
Are we going to do this for all submissions? Newspapers' leanings, political donations of blog authors...?
And if so, would it be reasonable to expect examples of actual bias? Or at least credible sources for that kind of information?
> Are we going to do this for all submissions? Newspapers' leanings, political donations of blog authors...?
Well, this isn't an institution that most people are familiar with. For example, most people know the New York Times is liberal and that the Wall Street Journal is (moderately) conservative. We wouldn't need someone to point that out. But in this case, the OP's information is helpful in analyzing the source for any bias.
The sad part is you aren't wrong
We expect a certain about of editorial bias from newspapers, and we accept that individuals are going to have their own biases, but it's often not obvious whether a generically named organisation is tied to an ideology or not. This isn't a dispassionate report written by someone who incidentally holds certain political views, it's a report written with the express purpose of influencing public policy in line with a specific ideology. Knowing that is important in judging its conclusions, just as knowing whether a report on climate change has been funded by a windmill manufacturer may alter your impression of its claims.