Federalism's Cold War
On last week's episode of "The Young Guns," as we discussed the dire circumstances besetting California, I delivered an altogether unpleasant announcement: that the Golden State's public sector pathologies (and their effects on the state's economy) have forced this native son to begin the process of becoming a resident of another state within the next few years. And based on the news, it looks like I'm not alone.
Here's Joel Kotkin, in a must-read interview from the weekend edition of the Wall Street Journal:
Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.
And here's Art Laffer and Stephen Moore, also in the Journal, describing the findings of their new report on tax policy for the American Legislative Exchange Council:
Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.
Then there's the question of in-migration from state to state—or how people vote with their feet. As common sense would dictate, people try to move from anti-growth states and cities to more welcoming climates...
The transfer of economic power and political influence from high-tax states toward low-tax, right-to-work ones is one of America's most momentous demographic changes in decades. Liberal utopias are losing the race for capital. The rich, the middle-class, the ambitious and others are leaving workers' paradises such as Hartford, Buffalo and Providence for Jacksonville, San Antonio and Knoxville...
Illinois, Oregon and California are state practitioners of Obamanomics. All have passed soak-the-rich laws like the Buffett Rule (plus economically harmful regulations, like California's cap-and-trade scheme), and all face big deficits because their economies continue to sink. Illinois has lost one resident every 10 minutes since hiking tax rates in January. California has 10.9% unemployment, having lost 4.8% of its jobs over the past decade.
I don't think this point can be made forcefully enough. Our political and economic polarization isn't just the product of national aggregates. The vast majority of our states are self-segregating by public policy. In essence, federalism has made possible what amounts to a cold war between the states. And places like California are increasingly sending signals to people like your author -- young, upwardly mobile but not affluent, and about to embark on their first major series of expenditures related to home and family -- that they don't care if we join the opposition.
A word of warning to states like California, New York, and Illinois: in an era where the barriers to exiting a state are at an all-time low -- and the mobility of work is at an all-time high -- you will be but one competitor in a market of 50. Don't be surprised when your failings are met by a decline in market share. And yes, nostalgic attachments and inducements like California's serene climate may slow the exodus, but they won't reverse it. Life, after all, is more than just sun through the palm trees -- California, like most beauties, will find it's not able to live on its looks forever.
One note in conclusion. The varying approaches of these states may be less significant than the psychology underpinning them. California, for instance, attempts to hang on to people like me by promoting itself as a lifestyle choice (albeit a luxury one). My future home state of Tennessee (one of those non-income tax states, by the way) counts on the fact that the lifestyle I'm most concerned about is the one that will eventually belong to my unborn children. That difference in outlook may tell us more about the philosophical chasm between the two places than any examination of economic policy ever could.
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Sep '11
Re: Federalism's Cold War
So, then the question becomes, how do we in low-tax states protect ourselves from the influx of people that are wont to vote for higher taxes? They may move for work, but that doesn't mean they have enough awareness to realize WHY they have to move.
Dec '10
Re: Federalism's Cold War
Aw, Tennessee. I was going to suggest Colorado where there are real mountains and plenty of natural beauty (and weather drama, but we won't go there now). We need more conservative California transplants. We've already absorbed enough of the other kind.
Like DutchTex said, Californians come here to get away from the mess, vote the same way they did in California, and then are surprised when the results are the same. Liberal California exiles are a blight upon the land. Sure you won't reconsider?
Jul '11
Re: Federalism's Cold War
Good choice on leaving. I heard your podcast, and was actually hoping for more gun talk beyond Diane's desire to get a shotgun for home protection, but disagreed with the whole conservatives need to hold out in California and institute change. It will not work and of that I am positive. Go mini Galt baby and bail. California is every bit as doomed as Greece economically and their only solution, after they tax away the rest of the conservative wealthy, will be to beg the Feds for my money. If a conservative president is in office maybe they will refuse and force California to change their wicked wicked ways. The sooner California fails, the sooner the liberal sickness destroying that once great state will be cured. I was born there and returned for college and vacation there so I do have roots but man are your politicians lunatics.
Oct '10
Re: Federalism's Cold War
I left California in 1991. My wife and I sold our house, our cars, and moved to our new location in Europe, where I had accepted a post in the European branch of of the company I had founded in California in 1982.
What was the reaction of the California Franchise Tax Board (FTB, or Tax Nazis)? Well, that since we hadn't “broken domicile” and clearly would return to the Golden State of gridlocked 101, homeless people in the Sausalito post office at 3 A.M., and crack vials crunching beneath our shoes as we boarded the SFO shuttle at Tam Junction, we were still residents of California for tax purposes and owed Sacramento their tithe of everything we earned in Europe.
We ended up spending US$36,000 in legal fees and filing hundreds of pages of documentation over three years and, as the lawyers say, “won”. That means we reclaimed US$5,000 in deductions we'd failed to claim in earlier years, and that the FTB “suspended” their claim against us.
I vowed I would never again invest in or otherwise contribute to a California venture, and I never have.
Edited on April 24, 2012 at 11:23pmJul '11
Re: Federalism's Cold War
John Walker, I dropped my CA medical license a 7 years ago for similar legal reasons and have never looked back beyond vacations to see nature with an occasional tippish amercianish viewing of the rodent in Anaheim.
May '10
Re: Federalism's Cold War
You're a yumbna!
Apr '11
Re: Federalism's Cold War
You think it's fast now. Just wait until the one bit of Romney's tax plan most likely to pass gets through; an exchange of lower base rates for the ending of tax deductibility of state income taxes (possibly a cap on the deduction rather than a total elimination). Without a massive federal subsidy for living in an income taxed state, we should see people even less keen to remain.
Dec '11
Re: Federalism's Cold War
TRUTH!!!
Oct '11
Re: Federalism's Cold War
As my husband said when Brown got elected: do they think they can keep us here? I always called myself a born-again Californian, I left twice and came back twice. The baby has one year left of high school, at which point California's claim on me will end. Working and running a business here, let alone the expense of Catholic school, is nothing short of masochistic.
May '11
Re: Federalism's Cold War
I think anyone with any financial resources who now lives in California who could work outside of California would have already moved if they could sell their house. Anyone who has been paying attention realizes that a home in this environment is more likely to be an anchor than an asset. Tax policy in individual states have an impact on where people choose to live but if you can't sell your house you are screwed.
Aug '10
Re: Federalism's Cold War
Allow me to cast this emerging migration in more personal terms. My hope is to shed light on the personal cost I must pay should I decide to leave.
I was born and raised in a small coastal working class town near Los Angeles. I live in my home town. In a given week I will drive past the exact location of my birth at least a dozen times. Every place I go holds meaning and memory for me.
What I see every day is a microcosm of both the wonder and the pathology that is life in Coastal California.
As a working class man with working poor roots my leaving here will be nothing short of banishment. I mean that in the classical sense.
I will forced off the land of my birth, forced from the place my ancestors fled to for a better life, from the place where I first fell in love, from my Beulah land, all by the forces Troy described above.
How will I sing the song of the Lord in strange land?
I would not be voting with my feet, I would be fleeing for refuge from the only place I want to be.
Edited on April 25, 2012 at 5:29amAug '10
Re: Federalism's Cold War
Isabel Wilkerson's The Warmth of Other Suns describes the Great Migration of 6 million Southern blacks between WWI and the end of the Civil Rights era. They fled Jim Crow to pursue a better life.
What most vexes me is the prospect of having to flee my home to escape this locust swarm of the very rich, the very poor, the public employees unions, and the feckless bureaucrats now laying waste to my home.
Failed governments and failed societies always produce refugees. This is the source of my empathy for illegals from south of the border.
What is alarming to me is that in the third generation of what should be an upward American arc I may well be one of millions of an emerging political and economic diaspora.
I ain't going down without a fight, but I may need to double my income in order to simply hold my ground.
In places like Manhattan, The City (San Francisco) and Coastal California, taxes, regulations, and real estate are a subtle form of violence.
I wish I had the sense to recognize this twenty years ago.
Troy, please thank your parents, they raised you to recognize a rigged game.
Edited on April 25, 2012 at 5:44amAug '10
Re: Federalism's Cold War
I'm one of those that left California last year in September. I do miss California. I miss the people most, but the locale was great too (and the Mexican food). Now I have my 9-10% in taxes back, and I can exercise my right to carry for self-defense if I so desire. I've gone from a state where I'd have to live with multiple roommates to make rent, and now I can rent on my own (and hopefully buy a home in the future) as a single guy with slightly higher pay than I was making in CA.
Two years before I left California my friend and his wife left California for Colorado. One of his reasons was to avoid raising a family in expensive CA. Most of my friends ended up leaving CA in the last four years and some that remained are still looking to leave.
Oct '11
Re: Federalism's Cold War
I would not be voting with my feet, I would be fleeing for refuge from the only place I want to be. · 13 hours ago
Edited 13 hours ago
Beautifully put. While I was not born in CA, my ties here are strong and deep. My parents are from Scotland and made stops in Toronto and Detroit on their way west. Three of my siblings were born here, one brother and my father are buried here. I have a memory from every beach from San Diego to Ventura. My husband had a motorcycle before we married and there's not a secondary road that we didn't travel then, or a trail we have not hiked since.
But my resentment over what this state has become is also strong and deep. My brothers and sisters and I also wish we had seen the writing on the wall 20 years ago and had put down roots 20 years ago somewhere else. That the family will get split up now is inevitable.
You have to really try to screw up a state this great. Unfortunately, we've had leaders at every level, for many years, dedicated to the cause.
Jul '11
Re: Federalism's Cold War
This New Yorker feels for you Californians; I too am getting out. Next year I'm getting married to a beautiful woman of the West and we're moving to her home state of Montana. We'll earn less money there, but we won't have to contend with an obscene cost of living, high taxes (including an 8.875% sales tax vs. 0% in Montana), the constant hassle of high-density living, and the feeling that we're strangers in our own country.