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Exposing the Fiction of Low Tax States

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Texas Gov. Rick Perry recently wrote an editorial in the Washington Times claiming that Texas, with its low income tax, was able to balance its budget, while California, with its high income taxes, was not.

While other commentators have pretty much ripped apart the quality-of-life argument here (Texas has the 8th highest poverty rate in the country, for example), it's worth noting the other ways Gov. Perry misleads. It doesn't hurt that Texas profited wildly from the oil spike last summer and now has that money to spend in 2009 (even as oil prices are climbing yet again). But even this is not the full reason for the Texas boom and the California bust.

Gov. Perry, like Gary Alexander in his citing editorial, is telling only half the story.

States which have no income taxes, like Texas, have to, by default, collect most of their income from property taxes. This is as it should be.

California's budget-busting proposition 13 is exactly how things should not be, and is far more responsible for their woes than alleged over-spending. In fact, California spends relatively little (about $100 billion/year, normally) than states of comparable size. New York state has a budget of apx. $80 billion with slightly more than half the population of California (19 millions vs. 36 millions). Texas, with 24 million people has a budget of 168 billion, bigger than either California (with its larger population), or New York.

That Texas is a frugal state is a total fiction. (In fact, its budget is only balanced this year due to federal stimulus money).
That California is a "spendy" state is also a total fiction.
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It is the WAY taxes are collected - by income (and, much of that in wildly fluctuating Capital Gains) for California and New York vs. property taxes for Texas that makes the difference.

Even better than property taxes would be a Land Value Tax, which would be the most consistent and fair tax of all (or, in the words of Milton Friedman, "The least bad tax"), and would actually encourage building, and end urban sprawl - from developers (i.e. Land Squatters) by untaxing the development of capital in the form of buildings. The land value tax would discourage sitting on vacant land, and encourage healthy development.

Support the Single Tax
.

Another thing California needs to do, like all states, is to come out form under the rock of Big Banking and its onerous interest rates, by adopting its own State Bank. The only state with a record surplus this year is North Dakota and it has had a State Bank since 1919.

Support a State Bank for California.

 

http://newthinking.blogspot.com/

Scott Baker is a Managing Editor & The Economics Editor at Opednews, and a blogger for Huffington Post, Daily Kos, and Global Economic Intersection.

His anthology of updated Opednews articles was published by Tayen Lane Publishing (March, 2015) and may be found here:
https://tayen-lane.squarespace.com/america-is-not-broke/

Scott is President of Common Ground-NYC (http://commongroundnyc.org/), a Geoist/Georgist activist group. He has written (more...)
 

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