I’ve previously posted about the new federal tax law’s possible effects on California and the rest of the deep blue states. Ditto about California’s astronomical gas prices. More has come to light, so the need for “Part II”.
I. California and Blue State Taxes.
April 15 has come and gone. Many Californios – of which I used to be one, like millions of others scattered throughout the country – and others in deep blue states are cutting checks to the IRS instead of receiving refunds. Curtailing SALT (the federal tax subsidy to high-tax states, the Hillary electorate) and the home mortgage interest deduction (HMID), and a few other tax changes, have wreaked havoc with their expectations. Now, they really know what it means to live in a high-tax state.
First, lower refunds across the country are expected since withholding was reduced in each one of your paychecks. Paychecks were bigger as the feds took less. We could go back to the old system of the feds lopping off more from each one of your paychecks and giving a pittance back at the end of the tax year. Let’s face it; withholding is a scam.
Second, the caterwauling from California about getting less from the feds than they send to DC has reached a fever pitch. The only problem: it probably isn’t true. George Skelton in the LA Times raised serious doubts, as does Ann Hollingshead with the Legislative Analyst’s Office and the Tax Foundation (see here).
The old wives’ tale was born of a flawed study with gimmicky assumptions. Among other things, not properly accounted was California’s peculiar demography. The state’s age pyramid is distorted with a mass of the young and proportionally fewer elderly. I suspect that’s probably due to massive foreign immigration over the past 5 decades and the hemorrhaging of retirees to other environs. As a result, the accounting contains less federal Social Security and Medicare payments. How much of this is due to the policies championed by the state’s ruling party? Hmmmm, I wonder.
Also, the military draw down since the end of the Cold War didn’t help. Still, in the end, the accounting gimmicks in the earlier study exaggerated the monies going to DC and undervalued the monies to the state. It’s just more proof of Disraeli’s old line: “There are three kinds of lies: lies, damned lies, and statistics.”
As for the clamps on the HMID, any adverse effects can be traced to California foot-shooting. Real estate is very pricey in the state, and getting pricier. It’s a good bet that much of the state’s middle class have mortgages that greatly exceed the limits in the tax law. Why is that? You need look no further than the Leviathan of taxes and regulations smothering housing in the state. Eco-craziness and taxaholism leaves a hangover. It comes in the form of homeless encampments – the usefulness of human poop maps (SF, but applicable elsewhere) as a result – skyrocketing rents, and a strangulation of supply.
Aiming a cocked-and-loaded gun at your foot is an appropriate metaphor.
II. California’s Gas Prices.
Once again, foot-shooting reigns supreme regarding the state’s astronomically high gas prices. But the mandarins of the ruling party are looking for scapegoats. A Berkeley prof of Business Administration, Severin Borenstein, gave the goons ammunition by apparently identifying a 24-cent “surcharge”, an amount that he couldn’t account for. The near-socialist ruling party didn’t need much of an excuse to go on a jihad against capitalism. Borenstein gave them one.
Well, Severin, here’s one factor that you didn’t think of: the state has so mangled the market for fuel that supply and demand have nowhere to reach but up. Sorry, Newsom and the other chiefs of the ruling party, you can’t suspend the laws of supply of demand like you tried with immigration law. There’s no such thing as a sanctuary from supply and demand. The Soviets took that route to prosperity, and discovered poverty and social collapse.
The peculiar CARBOB blend, cap-and-trade, greenie taxes, and the constant finagling of CARB (Ca. Air Resources Board) have given the state the least consumer-friendly fuel market in the country. Such markets still have supply and demand. It’s just that they intersect at a place above almost any red state. Call it the lefty “surcharge”.
This postscript to previous posts only makes the plight of blue states bleaker. The fact that this is democratically-chosen bleakness doesn’t alter the reality. If you want the clowns, accept what happens when you’re ruled by clowns.
And that includes sending more money to the state, any metroplex in the state, and DC. And add to it the high prices for almost anything, including gas. I guess that you get what you vote for.
RogerG