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.
Comments
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.