Saturday, April 2, 2011

A Perpetual Feast--Eating The Rich

Californians continue on the blind path to fiscal ruin. The Republican minority in the state legislature has worked with the once and present Democratic Governor Jerry Brown on cutting costs. But those cuts so far have been a band-aid on an economic cancer. Having gotten these cuts, Brown then told the Republicans that it's only fair to permanize tax increases passed on a temporary basis to make up part of the previous budget shortfall. The Republicans demurred.

And for that reason, California still doesn't have a current budget. I give credit to the Republicans for not being fooled by the minuscule cuts or panicking at the thought that the government of California might come to a halt with no budget and therefore no money to spend. One of the things Brown was trying to do was to get the Republicans to agree to placing a tax-rate extension on the ballot via a referendum. Brown didn't want to take the hit for continuing an emergency temporary tax increase, so he wanted it placed on the ballot at a special election. The Republicans have stood firm for weeks, refusing to go along with that surrender of responsibility.

So, Brown has decided to go to his Democratic base to raise enough signatures to make the tax extension a fall ballot initiative. California is drowning in red ink, but instead of making the draconian cuts necessary, especially public employee pay rates and retirement benefits (now nearly 60% of the unfunded debt, and getting worse), Brown wants to extend a tax that has already driven hundreds of businesses and thousands of individual taxpayers out of California. Like Democrats nationally, California Democrats believe in taxing our way to prosperity. Funny how that never seems to work out.

But wait, there's more. Not only do Brown and the Democrats want to extend current heightened tax rates, but they also are broaching the idea of raising the income tax rate on the highest earners. Like we've never heard that plan before. Raising the top rate (earning more than $500,000 per year) is estimated to raise $2.5 billion per year. California's 2010 budget deficit is $26.6 billion. So in about 11 years, the increase would pay off one year's deficit. Swell program, huh? My sister would have referred to that as a piss in the Pacific Ocean.

The budget deficit reduction estimate is of course already out of date. It assumes the same number of top earners as there were at the end of fiscal 2009. The Democrats have apparently forgotten to check with the border guards who are having trouble counting the number of people fleeing into Arizona to escape California's taxes. It also assumes that small to moderate size businesses which are not corporations will remain in California. The scheme doesn't make exceptions for "wage earners" who are actually small and medium-size business owners being taxed as if their business income is their personal income. Details, details.

But here's the really sad part. It isn't only Democrats and other assorted leftists who think this way. A recent poll shows that 78% of Californians like the idea of eating the rich. 89% of Democrats support such a plan (natch). But so do 79% of independents and an appalling 60% of Republicans. Now the poll was commissioned by the California Federation of Teachers, and conducted by Democratic pollster Ben Tulchin, so it's likely to be about as accurate as the Gallup Poll which skews left and Democratic. But even that built-in error factor is not enough to overcome the fact that a hefty majority of Californians actually thinks that in a time of downsizing, unemployment, uncertainty and a possible double-dip recession, taxing the "rich" into leaving California entirely is a dandy idea.

Taking their cue from Brown, the Teachers Union wants to place the 1% "shame on you for earning more money than I do " tax increase on the November ballot. There's method to their madness. For one thing, members of the union alone would bring sufficient signatures to place the measure on the ballot. It would act as a sweetener for Brown's extension proposal on the same ballot. The more tax increase measures on the ballot bolstered by phony predictions of revenue from those taxes, the more likely the voters are to think that a whole bunch of tax increases could balance California's budget. The Laffer Curve was banished from the public forum in California decades ago.

To "prove" their point that increasing taxes doesn't cause individuals and businesses to leave the state, the Teachers Union cited a study by the nonpartisan Public Policy Institute of California. The study showed that a mere 1.7% of California job losses were the result of business establishments leaving the state. One small problem. That study covered 1992 through 2006. In other words, businesses weren't leaving in droves--yet. Since the end date of that study, California has raised income taxes twice, corporate taxes three times, sales taxes once, and the massive market crash and recession weren't even yet on the horizon.

In 2010 alone, nearly 125 California businesses with revenue exceeding $25 million each and an estimated total work force of 6,000 left for greener pastures across the state line or simply closed their doors permanently. Mega-corporations in Silicon Valley are giving serious consideration to moving out of state, taking their many "rich" employees with them. That stands the earlier study on its head.

All this proves that eating the rich (if you can catch them before they're over the state border) is not limited to Democrats and their socialist base. "They can afford it" sounds nice, but why should they? And what makes those Republicans and independents think that they will stick around to be eaten? Envy is a sin. Theft is a crime (unless you're the government). Eating the rich is not only a truly dumb idea, but if you think about it, eating your fellow human beings is cannibalism. However, in California, cannibalism is considered nothing more than an alternate lifestyle.

10 comments:

Tennessee Jed said...

As beautiful as California is, I think the only sane thing to do is for everybody who is sane (e.g. to the right of Karl Marx, Nancy Pelosi, and Sean Penn) leave. This will leave a state full of 1) illegal immigrants 2) Hollywood rich liberals 3) bleeding heart liberal educators. Can you say "failed state." I know you just settled in to your retirement place, but honestly, Hawk, isn't it time to "just say go?"

Joel Farnham said...

LawHawk,

When do you expect anarchy in the streets of the major cities of California?

LawHawkRFD said...

Tennessee: We of the Caliente Corridor have not yet begun to fight! The Tea Party got a late start in the state, and yet a near-majority of state Senate seats were close, with the Democrats eking out a lot of very narrow victories. The Assembly was nearly as close. A few hundred votes the other way in the contested districts, and we'd have a very different picture in Sacramento. Even Moonbeam Brown got the message, and he has created some very unhappy public employees by going after their outrageous, bankrupting benefits and retirement packages. To paraphrase Churchill, this may be the end of the beginning.

As for eating the rich, I chalk it up to human nature and a lack of clear reasoning that isn't exclusive to Californians.

T_Rav said...

LawHawk, stories like this bring to mind a short story by Rudyard Kipling, "The Mother Hive." It basically involves a beehive which is told by invading moths they don't need to slave away all the time and can just live off the honey from the hive, and basically create their own leisurely utopia. Obviously, this doesn't work at all, and the hive falls into decay before being destroyed by the beekeepers for being unproductive. It's a good story, and every time I read about just how screwed CA is, I think of how symbolic Kipling's story is.

LawHawkRFD said...

Joel: California has to get weaned off the drug of something-for-nothing, and that won't be easy. But it's not impossible. Even our recent "entitled" students protesting tuition increases at the state universities look rather mild compared to the Londoners. There's going to be some serious civil unrest before this is over, but frankly I don't think it will be as bad as the 60s. There are signs of the liberal/welfare wall cracking, but it just isn't going to happen overnight. I've made it through six decades in this state, and I'm not going to cut and run now. Besides, I owe it to the current generation to try to fix the mess my compatriots and I from the 60s generation made out of this once great state.

LawHawkRFD said...

T_Rav: That would be a good analogy. I tend to think of California as the largest lunatic asylum ever to be taken over by the inmates. Let's call it "Insanotopia."

Joel Farnham said...

LawHawk,

California being weaned will be like an alcoholic coming off a bender. Have to be careful about the alcoholics as opposed to the heroin addicts. Our system can be compared to the way an addict operates. An addict always has money for his addiction. Almost none for everything else.

As long as an addict has a source of cash, he will be able to acquire his drugs of choice. As long as these heavy spenders have their seats, they will spend and spend and spend.

Have you ever reasoned with an addict? He will agree right down the line as to what the problem is, how to go about changing and all the rest. As soon as you are out of sight, you are out of mind and your rules as well. Well, I submit to you, LawHawk, California assemblymen are addicts. They are addicted to the power which comes from the bestowing of money.

Watch out for specialized funds that are set aside. This is the addict's stash so to speak.

I fully expect LA, Oakland, San Francisco and to a certain extent Sacramento to devolve into a chaos that could easily rival the 60's. The main difference here is in the sixties it was fashionable to protest. Protest something, anything. I doubt the college students can be motivated like they were in the 60's.

LawHawkRFD said...

Joel: It's possible, and I fully expect unrest in the liberal urban centers. I just don't see it as being the same as the civil right/Vietnam War era. Sure, there will be riots in Oakland, but there are always riots in Oakland, along with South Central L.A. and a few other hotspots. But the left is growing smaller and more entrenched in their remaining hideouts, and even liberals are starting to see that much of what they believed simply isn't true. Bad habits, like addictions, die hard, and addicts are indeed clever at deceiving themselves and others. Eventually they have to go cold turkey, but most want to try the easy way of "cutting down," or "controlling it." As AA says, "half-measures availed us nothing." It's quit, die, or go crazy. More people than I can remember for decades are ready to quit.

StanH said...

My son dates a girl from Orange County, her parents are tax refugees from California. They shuttered their small business, and moved East with the entire brood, and a half dozen jobs. Keep up the good work, soon the parasites (unions) will kill the host (CA).

LawHawkRFD said...

Stan: Sadly, Orange County used to be the most conservative county in California. Today, more newspapers are sold in Spanish-language edition than in English, and the wealthy old Californios have been replaced by Persians and Afghans. UC Irvine, which is located in Orange County, is one of the hotbeds of university Islamist, anti-Israel activities. Sad.

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